Oracle® Outsourced Manufacturing For Discrete Industries: User's Guide Release 12.2

Oracle® Outsourced Manufacturing for Discrete
Industries
User's Guide
Release 12.2
Part No. E48953-04
September 2015
Oracle Outsourced Manufacturing for Discrete Industries User's Guide, Release 12.2
Part No. E48953-04
Copyright © 2013, 2015, Oracle and/or its affiliates. All rights reserved.
Primary Author: Sujata Patnaik
Contributing Author: Muralidharreddy Venkatasesha, Santosh Samantaray, Nikhil Tungare, Abhishek
Srivastava
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Contents
Send Us Your Comments
Preface
1 Overview
Overview of Oracle Outsourced Manufacturing...................................................................... 1-1
2 Setting Up Subcontracting
Overview of Setting Up Subcontracting................................................................................... 2-2
Setting Profile Options............................................................................................................. 2-6
Setting up OEM Organizations................................................................................................. 2-7
Setting Up Manufacturing Partner Organizations................................................................. 2-10
Defining Customers and Suppliers........................................................................................ 2-16
Associating Customers and Suppliers.................................................................................... 2-18
Setting Up Item Definitions....................................................................................................2-20
Setting Up Bills of Material for Outsourced Assemblies.......................................................2-29
Setting Up Specific Subcontracting Accounting for Chargeable Subcontracting.................2-30
Defining Specific Receivables Transaction Types for Chargeable Subcontracting..............2-32
Defining Specific Transaction Sources for Chargeable Subcontracting............................... 2-33
Setting Up Specific Order Management Transaction Types for Chargeable Subcontracting
.................................................................................................................................................. 2-34
Setting Up Standard Costs of Components and Assemblies for Chargeable Subcontracting
.................................................................................................................................................. 2-36
Defining Price Lists for Subcontracting Components........................................................... 2-38
Setting Up Purchase Price of an Outsourced Assembly.........................................................2-41
Setting Up a Shipping Network............................................................................................. 2-43
Defining Sourcing Rules......................................................................................................... 2-50
iii
Defining Netting Agreements................................................................................................ 2-50
3 Subcontracting Process
Subcontracting Planning........................................................................................................... 3-1
Overview............................................................................................................................. 3-1
Outsourced Assembly with Synchronized Components..................................................... 3-2
Outsourced Assembly with Pre-positioned Components.................................................... 3-3
Outsourced Assembly with Prepositioned and Synchronized Components....................... 3-5
Subcontracting Process Execution............................................................................................ 3-6
Outsourced Assembly with Synchronized Components..................................................... 3-7
Outsourced Assembly with Prepositioned Components..................................................... 3-9
Outsourced Assembly with Prepositioned and Synchronized Components..................... 3-11
Outsourced Assembly with Prepositioned and Synchronized Components (Internal MP
Organization)..................................................................................................................... 3-13
Subcontracting Concurrent Programs..................................................................................... 3-15
Interlock Manager................................................................................................................... 3-15
Reconciliation Manager.......................................................................................................... 3-19
Auto Receive Components...................................................................................................... 3-22
Process Receiving Transactions.............................................................................................. 3-23
Processing Logic...................................................................................................................... 3-24
4 Endeca Information Discovery

Outsourced Manufacturing Visibility Using Endeca............................................................... 4-1
5 Subcontracting Workbench
Overview................................................................................................................................... 5-1
Viewing Subcontracting Orders............................................................................................... 5-1
Viewing Replenishment Orders............................................................................................... 5-4
Consumption Adjustments....................................................................................................... 5-6
Processing Consumption Adjustments.................................................................................... 5-8
Entering Component Lots....................................................................................................... 5-10
6 Subcontracting Accounting Process

Chargeable Subcontracting Accounting Process...................................................................... 6-1
Costs and Prices................................................................................................................... 6-3
Replenishment Sales Orders Shipments.............................................................................. 6-4
Subcontracting Orders Receipts........................................................................................... 6-6
Buy/Sell Subcontracting Accounting Process........................................................................... 6-7
Full Outsourcing Accounting Process.......................................................................................6-8
iv
Costs and Prices................................................................................................................... 6-8
Replenishment Sales Order Shipments.............................................................................. 6-13
Subcontracting Order Receipts.......................................................................................... 6-14
Additional Processes to Manage Subcontracting................................................................... 6-15
7 Reports
Reports Overview...................................................................................................................... 7-1
Subcontracting: Subcontracting Order Report......................................................................... 7-1
Subcontracting: Confirmation Report (External Mode)........................................................... 7-4
Subcontracting Confirmation Report (Internal Mode)............................................................ 7-9
Subcontracting: Cost Update Analysis Report....................................................................... 7-10
8 Subcontracting For Seiban-Based Manufacturing

Overview of Seiban-Based Manufacturing.............................................................................. 8-1
Seiban-Based Manufacturing Setup......................................................................................... 8-1
Organization Setup................................................................................................................... 8-2
Defining Cost Groups for MP Organizations.......................................................................... 8-5
Defining Seiban Numbers........................................................................................................ 8-7
Organization Items.................................................................................................................. 8-11
Seiban-Based Subcontracting Planning................................................................................. 8-12
Seiban-Based Subcontracting Execution................................................................................ 8-13
9 Subcontracting Business Flows

Drop Ship Components from RMS to MP............................................................................... 9-1
Modeling Components for Drop Ship...................................................................................... 9-1
Planning Drop Ship Components.............................................................................................9-5
Process Execution Drop Ship Components.............................................................................. 9-6
Multi-Level Outsourcing........................................................................................................... 9-8
Outsourcing Phantom Assemblies........................................................................................... 9-8
Outsourcing Lot and Serial-Controlled Items.......................................................................... 9-9
10 Troubleshooting
Overview................................................................................................................................. 10-1
Interlock Manager................................................................................................................... 10-1
Auto Receive Components...................................................................................................... 10-3
Process Receiving Transactions.............................................................................................. 10-3
A Workflows
Generating the COGS Account from the Order Type............................................................. A-1
v
B Custom APIs for Outsourced Manufacturing
JMF Custom Packages............................................................................................................... B-1
C Windows and Navigator Paths

Windows and Navigator Paths................................................................................................. C-1
Glossary of Subcontracting Terms
Index
vi

Send Us Your Comments
Oracle Outsourced Manufacturing for Discrete Industries User's Guide, Release 12.2
Part No. E48953-04
Oracle welcomes customers' comments and suggestions on the quality and usefulness of this document.
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vii

Preface
Intended Audience
Welcome to Release 12.2 of the Oracle Outsourced Manufacturing for Discrete Industries
User's Guide.
This guide contains the information needed to implement and use Oracle Outsourced
Manufacturing for Discrete Industries.
See Related Information Sources on page x for more Oracle E-Business Suite product
information.
Documentation Accessibility
For information about Oracle's commitment to accessibility, visit the Oracle
Accessibility Program website at
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Structure
1 Overview
2 Setting Up Subcontracting
3 Subcontracting Process
4 Endeca Information Discovery
5 Subcontracting Workbench
6 Subcontracting Accounting Process
ix
7 Reports
8 Subcontracting For Seiban-Based Manufacturing
9 Subcontracting Business Flows
10 Troubleshooting
A Workflows
B Custom APIs for Outsourced Manufacturing
C Windows and Navigator Paths
Glossary of Subcontracting Terms
Related Information Sources

You can choose from many sources of information, including online documentation,
training, and support services, to increase your knowledge and understanding of Oracle
Outsourced Manufacturing for Discrete Industries.
If this guide refers you to other Oracle Applications documentation, use only the
Release 12 versions of those guides.
Online Documentation
All Oracle Applications documentation is available online (HTML or PDF).
• Online Help - Online help patches (HTML) are available on My Oracle Support.
• About Documents - Refer to the About Document for the mini-pack or family pack
that you have installed to learn about new documentation or documentation
patches that you can download. About Documents are available on My Oracle
Support.
Guides Related to All Products

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term you see in an Oracle Financials guide, please refer to the glossary for clarification.
You can find the glossary in the online help or in the Oracle General Ledger User's Guide.
Oracle E-Business Suite User's Guide: This guide explains how to enter data, query,
run reports, and navigate using the graphical user interface (GUI) available with this
release of Receivables (and any other Oracle Applications products). This guide also
includes information on setting user profiles, as well as running and reviewing reports
and concurrent processes.
You can access this user's guide online by choosing "Getting Started with Oracle
Applications" from any Oracle Applications help file.
User Guides Related to This Product
Receivables shares data and setup information with other Oracle Applications products.
Even if you have not installed them as separate products, your Receivables application
includes some forms and functionality from other Oracle Applications. Therefore, you
may want to refer to other user guides when you set up and use Receivables.
x
Oracle Public Sector Financials Documentation
Information regarding public sector functionality in Receivables is documented in this
guide. For information regarding public sector functionality in other Public Sector
Financial's products, refer to the following documentation:
• Oracle General Ledger User Guide
• Oracle Purchasing User's Guide
• Oracle Payables User Guide
Oracle Projects Documentation Set

• Oracle Projects Implementation Guide: Use this manual as a guide for
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• Oracle Projects Fundamentals User Guide: This guide provides the common
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fundamental information about the Oracle Projects solution. This guide includes a
Navigation Paths appendix. Use this appendix to find out how to access each
window in the Oracle Projects solution.
• Oracle Project Costing User Guide: Use this guide to learn detailed information
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processing project expenditures, including calculating their cost to each project and
determining the General Ledger accounts to which the costs are posted.
• Oracle Project Billing User Guide: Use this guide to learn how to use Oracle
Project Billing to process client invoicing and measure the profitability of your
contract projects.
• Oracle Project Management User Guide: This guide shows you how to use Oracle
Project Management to manage projects through their lifecycles - from planning,
through execution, to completion.
• Oracle Project Resource Management User Guide: This guide provides you with
information on how to use Oracle Project Resource Management. It includes
information about staffing, scheduling, and reporting on project resources.
• Oracle Projects API's, Client Extensions, and Open Interfaces Reference: This
manual gives detailed information about all public application programming
interfaces (API's) that you can use to extend Oracle Projects functionality.
Oracle General Ledger User's Guide

Use this manual when you plan and define your chart of accounts, accounting period
types and accounting calendar, functional currency, and set of books. It also describes
how to define journal entry sources and categories so you can create journal entries for
xi
your general ledger. If you use multiple currencies, use this manual when you define
additional rate types, and enter daily rates. This manual also includes complete
information on implementing Budgetary Control.
Oracle Receivables Tax Manual
This manual provides everything you need to know about calculating tax within Oracle
Receivables, Oracle Order Management, Oracle Sales, and Oracle Web Customers. It
includes information about implementation procedures, setup forms and windows, the
Oracle Receivables Tax calculation process, tax reports and listings, and open interfaces.
Oracle Cash Management User Guide
This guide provides information about using Oracle Cash Management to clear your
receipts, as well as reconciling bank statements with your outstanding balances,
transactions, and receipts.
Oracle HRMS Documentation Set
This set of guides explains how to define your employees, so you can give them
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(operating unit). Even if you do not install Oracle HRMS, you can set up employees and
organizations using Oracle HRMS windows. Specifically, the following manuals will
help you set up employees and operating units:
• Using Oracle HRMS - The Fundamentals: This user guide explains how to set up
and use enterprise modeling, organization management, and cost analysis.
• Managing People Using Oracle HRMS: Use this guide to find out about entering
employees.
Oracle Payables User's Guide

Refer to this manual to learn how to use Invoice Import to create invoices in Oracle
Payables. This manual also explains how to define suppliers, and how to specify
supplier and employee numbering schemes for invoices. The guide also describes how
accounts payable transactions are posted to General Ledger from the payables
subledger.
Oracle Inventory User's Guide
If you install Oracle Inventory, refer to this manual to learn how to define your items,
units of measure classes, units of measure, and unit of measure conversions for use in
measuring amounts for your units of production items, as well as other information
about setting up and using Oracle Inventory.
Country-Specific Manuals
Use these manuals to meet statutory requirements and common business practices in
your country or region. They also describe additional features added to Receivables to
meet those requirements. Look for a user guide appropriate to your country; for
example, see the Oracle Financial's for the Czech Republic User's Guide for more
information about using this software in the Czech Republic.
xii
Oracle Applications Character Mode to GUI Menu Path Changes
This is a quick reference guide for experienced Oracle Applications end users migrating
from character mode to a graphical user interface (GUI). This guide lists each character
mode form and describes which GUI windows or functions replace it.
Oracle Financial's Open Interfaces Guide
This guide contains a brief summary of each Oracle Financial Applications open
interface. You can also read about the Receivables open interface tables in the
appropriate sections of the Oracle Receivables User's Guide.
Installation and System Administration
Oracle E-Business Suite Concepts
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12, or contemplating significant changes to a configuration. After describing the Oracle
E-Business Suite architecture and technology stack, it focuses on strategic topics, giving
a broad outline of the actions needed to achieve a particular goal, plus the installation
and configuration choices that may be available.
Oracle E-Business Suite Installation Guide: Using Rapid Install
This book is intended for use by anyone who is responsible for installing or upgrading
Oracle E-Business Suite. It provides instructions for running Rapid Install either to carry
out a fresh installation of Oracle E-Business Suite Release 12, or as part of an upgrade
from Release 11i to Release 12. The book also describes the steps needed to install the
technology stack components only, for the special situations where this is applicable
Oracle E-Business Suite Upgrade Guide: Release 11i to Release 12.1.1
Refer to this guide if you are upgrading your Oracle Applications. This guide describes
the upgrade process and lists database and product-specific upgrade tasks.
Maintaining Oracle E-Business Suite Documentation Set
This documentation set provides maintenance and patching information for the Oracle
E-Business Suite DBA. Oracle E-Business Suite Maintenance Procedures provides a
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E-Business Suite Maintenance Utilities describes the Oracle E-Business Suite utilities that
are supplied with Oracle E-Business Suite and used to maintain the application file
system and database. It also provides a detailed description of the numerous options
available to meet specific operational requirements. Oracle E-Business Suite Patching
Procedures explains how to patch an Oracle E-Business Suite system, covering the key
concepts and strategies. Also included are recommendations for optimizing typical
patching operations and reducing downtime.
Oracle E-Business Suite System Administrator's Guide Documentation Set
This documentation set provides planning and reference information for the Oracle
E-Business Suite System Administrator. Oracle E-Business Suite Set Up Guide contains
information on system configuration steps, including defining concurrent programs
xiii
and managers, enabling Oracle Applications Manager features, and setting up printers
and online help. Oracle E-Business Suite Maintenance Guide provides information for
frequent tasks such as monitoring your system with Oracle Applications Manager,
administering Oracle E-Business Suite Secure Enterprise Search, managing concurrent
managers and reports, using diagnostic utilities including logging, managing profile
options, and using alerts. Oracle E-Business Suite Security Guide describes User
Management, data security, function security, auditing, and security configurations.
Oracle Alert User's Guide
This guide explains how to define periodic and event alerts to monitor the status of
your Oracle Applications data.
Oracle E-Business Suite Developer's Guide
This guide contains the coding standards followed by the Oracle E-Business Suite
development staff. It describes the Oracle Application Object Library components
needed to implement the Oracle E-Business Suite user interface described in the Oracle
E-Business Suite User Interface Standards for Forms-Based Products. It provides information
to help you build your custom Oracle Forms Developer forms so that they integrate
with Oracle E-Business Suite. In addition, this guide has information for customizations
in features such as concurrent programs, flexfields, messages, and logging.
Other Implementation Documentation
Oracle Applications Product Update Notes
Use this guide as a reference for upgrading an installation of Oracle Applications. It
provides a history of the changes to individual Oracle Applications products between
Release 11.0 and Release 12. It includes new features, enhancements, and changes made
to database objects, profile options, and seed data for this interval.
Multiple Reporting Currencies in Oracle Applications
If you use the Multiple Reporting Currencies feature to record transactions in more than
one currency, use this manual before you implement Oracle Receivables. This manual
details additional steps and setup considerations for implementing Oracle Receivables
with Multiple Reporting Currencies.
Multiple Organizations in Oracle Applications
This guide describes how to set up and use Oracle Receivables with Oracle
Applications' Multiple Organization support feature, so you can define and support
different organization structures when running a single installation of Oracle
Receivables.
Oracle Workflow Administrator's Guide
This guide explains how to complete the setup steps necessary for any Oracle
Applications product that includes workflow-enabled processes, as well as how to
monitor the progress of runtime workflow processes.
Oracle Workflow Developer's Guide
This guide explains how to define new workflow business processes and customize
xiv
existing Oracle Applications-embedded workflow processes. It also describes how to
define and customize business events and event subscriptions.
Oracle Workflow User's Guide
This guide describes how Oracle Applications users can view and respond to workflow
notifications and monitor the progress of their workflow processes.
Oracle Workflow API Reference
This guide describes the API's provided for developers and administrators to access
Oracle Workflow.
Oracle E-Business Suite Flexfields Guide
This guide provides flexfields planning, setup, and reference information for the Oracle
E-Business Suite implementation team, as well as for users responsible for the ongoing
maintenance of Oracle E-Business Suite product data. This guide also provides
information on creating custom reports on flexfields data.
Oracle eTechnical Reference Manuals
Each eTechnical Reference Manual (eTRM) contains database diagrams and a detailed
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Applications product. This information helps you convert data from your existing
applications and integrate Oracle Applications data with non-Oracle applications, and
write custom reports for Oracle Applications products. Oracle eTRM is available on My
Oracle Support.
Oracle E-Business Suite User Interface Standards for Forms-Based Products
This guide contains the user interface (UI) standards followed by the Oracle E-Business
Suite development staff. It describes the UI for the Oracle E-Business Suite products and
how to apply this UI to the design of an application built by using Oracle Forms.
Oracle Manufacturing API's and Open Interfaces Manual
This manual contains up-to-date information about integrating with other Oracle
Manufacturing applications and with your other systems. This documentation includes
API's and open interfaces found in Oracle Manufacturing.
Oracle Order Management Suite API's and Open Interfaces Manual
This manual contains up-to-date information about integrating with other Oracle
Manufacturing applications and with your other systems. This documentation includes
API's and open interfaces found in Oracle Order Management Suite.
Oracle Applications Message Reference Manual
This manual describes all Oracle Applications messages. This manual is available in
HTML format on the documentation CD-ROM for Release 12.
Integration Repository
The Oracle Integration Repository is a compilation of information about the service
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endpoints exposed by the Oracle E-Business Suite of applications. It provides a
complete catalog of Oracle E-Business Suite's business service interfaces. The tool lets
users easily discover and deploy the appropriate business service interface for
integration with any system, application, or business partner.
The Oracle Integration Repository is shipped as part of the Oracle E-Business Suite. As
your instance is patched, the repository is automatically updated with content
appropriate for the precise revisions of interfaces in your environment.
Do Not Use Database Tools to Modify Oracle E-Business Suite Data

Oracle STRONGLY RECOMMENDS that you never use SQL*Plus, Oracle Data
Browser, database triggers, or any other tool to modify Oracle E-Business Suite data
unless otherwise instructed.
Oracle provides powerful tools you can use to create, store, change, retrieve, and
maintain information in an Oracle database. But if you use Oracle tools such as
SQL*Plus to modify Oracle E-Business Suite data, you risk destroying the integrity of
your data and you lose the ability to audit changes to your data.
Because Oracle E-Business Suite tables are interrelated, any change you make using an
Oracle E-Business Suite form can update many tables at once. But when you modify
Oracle E-Business Suite data using anything other than Oracle E-Business Suite, you
may change a row in one table without making corresponding changes in related tables.
If your tables get out of synchronization with each other, you risk retrieving erroneous
information and you risk unpredictable results throughout Oracle E-Business Suite.
When you use Oracle E-Business Suite to modify your data, Oracle E-Business Suite
automatically checks that your changes are valid. Oracle E-Business Suite also keeps
track of who changes information. If you enter information into database tables using
database tools, you may store invalid information. You also lose the ability to track who
has changed your information because SQL*Plus and other database tools do not keep a
record of changes.
xvi
1
Overview
This chapter covers the following topics:

• Overview of Oracle Outsourced Manufacturing
Overview of Oracle Outsourced Manufacturing

Outsourced manufacturing, interchangeably referred to as 'Collaborative' or 'Contract'
manufacturing or 'Subcontracting' in some industries, is a common business practice
where a brand-owner or an Original Equipment Manufacturer (OEM) outsources its
entire manufacturing operations or a portion of it by entering into a contractual
agreement with a manufacturing service provider commonly known as a
Manufacturing Partner (MP). The terms outsourced manufacturing or subcontracting
are used to refer to this common business practice in this guide.
There are different ways in which enterprises outsource their manufacturing activities.
These variations are driven by the strategic decisions that are made on some of the
following factors:
• Extent of Outsourcing:
Enterprises can opt to outsource the entire manufacturing process or a portion of it
by collaborating with a MP.
• Nature of Component Supply:

Enterprises can either own and manage the components for consumption at the
MP's facility, or engage a supplier to either own and consign inventory, or drop
ship the components at the MP's facility. In other situations, the OEM may charge
the MP by registering a sale of the components resulting in a complete transfer of
ownership
• Shipment of Finished Goods:

Enterprises can decide to either supply finished goods directly to the customer or
enter into a contractual agreement with the MP to drop ship the finished goods to
Overview 1-1
the customer's facility.
• Manufacturing Partner Type

Manufacturing Partners can be either external or internal.
• External Manufacturing Partner Organization:
Enterprises can outsource the manufacturing of standard or configured
assemblies to an external entity. In such cases the manufacturing partner is
defined as an external MP organization. This organization is defined only for
simulation purpose with Transfer to GL flag set as No.
• Internal Manufacturing Partner Organization:

Enterprises can outsource the manufacturing of standard or configured
assemblies to affiliated companies belonging to the same organization. In such
cases manufacturing partner is defined as internal MP organization. This
organization is defined as any other organization with Transfer to GL flag set to
Yes.
Oracle supports the following types of subcontracting business practices that involve
complete outsourcing of assemblies and most importantly, component sale by an OEM
to a MP:
• Chargeable (Shikyu) Subcontracting (Japan, Taiwan and Korea)
• Buy/Sell Subcontracting
• Full (Non-Chargeable) Outsourcing
Note: Buy/Sell and Full Outsourcing types of subcontracting works

with both internal MP organizations and external MP
organizations. Chargeable subcontracting works only with external
MP organization.
Chargeable (Shikyu) Subcontracting

Chargeable Subcontracting is a practice where the OEM completely outsources the
manufacturing of an assembly to an MP and makes a provisional sale of components by
invoicing the MP. These components are used to build the assembly at the MP's facility.
In this practice, although the OEM registers a sale of components to the MP, the OEM
still retains the ownership of the components and the inventory is reported under
OEM's inventory valuation. When the OEM receives the assemblies, the MP invoices
the OEM for the gross price of the assembly.
In a chargeable subcontracting relationship, the MP does not pay the OEM for
purchasing the subcontracting components. The OEM pays the MP only for the value
1-2 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

added portion in the outsourcing process, making it mandatory to net receivables
invoices for components, and payables invoices for assemblies.
Chargeable Subcontracting Process
The Chargeable Subcontracting Process diagram describes the chargeable

subcontracting business flow where an OEM outsources an assembly A to a MP and
makes a provisional sale of components B and C to MP that are consumed at the latter's
premises to manufacture assembly A. Assembly A's bill of material constitutes of 2 Ea
of B and 1 Ea of C. Although there can be different modes of component supply, in this
specific example, the OEM buys components B and C from a RMS (Raw Material
Supplier) and sells them to the MP. In this example:
1. OEM periodically buys Components B and C from the RMS at the rate of $2 per
each unit of B and $3 per each unit of C..
Overview 1-3
2. RMS ships components and invoices OEM for supplying B and C at the rate of $2
per B and $3 per C.
3. OEM outsources the manufacturing of assembly A by raising a purchase order or a

blanket release on the MP at the rate of $19 per each unit of A.
Note: The purchase price of the assembly is determined

considering the components' sales price and the value added in the
manufacturing process.
4. MP orders components B and C from OEM at the rate of $4 per each unit of B and
$6 per each unit of C.
Note: Although the OEM buys components at a certain price, the

OEM may sell the components to the MP at a different price to
prevent visibility of the actual purchase costs. In this example,
OEM procures B and C at $2 per each unit of B and $3 per each unit
of C from RMS and sales B and C at $4 per each unit of B and $6 per
each unit of C from MP.
5. Appropriate units of components B and C are allocated to the respective purchase

order for A for the purpose of planning and tracking. The OEM then ships
Components B and C, and invoices MP at the rate of $4 per each unit of B and $6
per each unit of C. The MP receives components B and C and manufactures A.
Note: The OEM registers a sale, but retains the ownership of the
components. MP ships assembly A and invoices OEM at the rate of
$19 per each unit of A.
6. OEM receives Assembly A and nets accounts receivable invoices for selling B and C
and account payble invoices for purchasing assembly. The OEM pays only for the
net value added in the manufacturing of A. In this example, the added value for
each unit of A is calculated as:
Purchase Price per unit of A = $19
Selling Price per unit of B = $4
Selling Price per unit of C = $6
Component usage per unit of A = 2 units of B, 1 unit of C
Net Value Add per unit of A = [$19 – (2 * $4 + 1* $6)] = $5
Note: In a chargeable subcontracting relation, the MP does not pay

the OEM for buying the components, making it mandatory to net
subcontracting account receivables and payables.
Buy/Sell Subcontracting
Buy/Sell Subcontracting is a business practice where an Original Equipment
Manufacturer (OEM) completely outsources the manufacturing of an assembly to an
external or internal Manufacturing Partner (MP) by buying the assembly from the MP
and most importantly, selling the components to the MP that are consumed in the
manufacturing of the assembly at the MP's premises. The ownership of the components
is transferred to the MP immediately after the OEM ships the components to the MP
unlike Chargeable Subcontracting where the OEM retains the ownership of the
components throughout the subcontracting process.
In a Buy/Sell scenario, the sale of subcontracting components and purchase of
outsourced assemblies are treated as independent business transactions. Receivables
and Payables are generally not netted – OEM pays the MP for purchasing the
outsourced assemblies and the MP pays for buying the subcontracting components
from the OEM.
Overview 1-5
Buy/Sell Subcontracting Process
The Buy/Sell Subcontracting process diagram describes a buy/sell subcontracting

business flow, where the OEM outsources assembly A to an MP, buys components B
and C from the RMS and sells them to the MP for manufacturing A at the latter's
premises. Assembly A's bill of material constitutes of 2 Ea of B and 1 Ea of C. In this
example:
each unit of B and $3 per each unit of C.
2. The RMS ships components and invoices the OEM for supplying B and C at the rate
of $2 per B and $3 per C.
3. The OEM outsources the manufacturing of assembly A by raising a purchase order

or a blanket release on the MP at the rate of $19 per each unit of A.

Note: The purchase price of the assembly includes the components'
sales price and the value added in the manufacturing process.
4. The MP orders components B and C from the OEM at the rate of $4 per each unit of
B and $6 per each unit of C.
Note: Like chargeable subcontracting, the OEM may sell the

components to the MP at a different price to prevent visibility of
the actual purchase costs. In this example, OEM procures B and C
at $2 per each unit of B and $3 per each unit of C from RMS and
sales B and C at $4 per each unit of B and $6 per each unit of C from
MP.
5. Appropriate units of components B and C are allocated to the respective purchase

order for A for the purpose of planning and tracking. The OEM ships Components
B and C, and invoices MP at the rate of $4 per each unit of B and $6 per each unit of
C. MP receives components B and C and manufactures A.
Note: In a buy/sell subcontracting relationship, the shipment of the

components to the MP results in a complete transfer of ownership
of the components from the OEM to the MP.
6. The MP ships assembly A and invoices OEM at the rate of $19 per each unit of A.
7. As the sale of subcontracting components and purchase of outsourced assemblies

are treated as independent business transactions, the OEM pays the MP for buying
assembly A at the rate of $19 per unit of A, and the MP pays the OEM at the rate of
of $4 per each unit of B and $6 per each unit of C.
Note: Unlike chargeable subcontracting, netting of subcontracting

account receivables and payables is optional for Buy/Sell
subcontracting.
Full (Non-Chargeable) Outsourcing External Organizations

Full Outsourcing is a business practice where an Original Equipment Manufacturer
(OEM) completely outsources the manufacturing of an assembly to an external
Manufacturing Partner (MP) and provides components to the MP but retains ownership
of the components.
In a full outsourcing relationship, components are shipped to MP on consigned basis.
The OEM receives completed assemblies in return and makes a payment to the MP for
Overview 1-7
the assembly added value only.
Full Outsourcing Process (External MP Organization)
The Full Outsourcing Process diagram describes a full outsourcing business flow ,
where the OEM outsources Assembly A to an external MP, buys components from the
RMS and ships the components to the MP to manufacture A at the MP's premises while
retaining ownership of components B and C:
each unit of B and $3 per each unit of C.
2. The RMS ships components and invoices the OEM for supplying B and C at the rate
of $2 per B and $3 per C.
3. The OEM outsources the manufacturing of assembly A to the MP, and ship
components B and C to MP on a consigned basis.

4. OEM retains ownership of the materials/components while they are used in the
manufacturing of assembly A. The MP makes no payment to buy and pay for the
components.
Note: The purchase price of the assembly includes only the value
addition and does not include the component value supplied by the
OEM.
5. The MP produces the assembly A from the components B and C and ships the
completed assembly A to the OEM.
6. The OEM receives the completed assembly A, and assumes the components B and
C have been brought back from MP.
7. The OEM pays the MP for the assembly added value only. In Full Outsourcing, the
purchase price of the assembly includes only the value addition. The component
value supplied by the OEM is not included in the purchase price of the assembly.
Full (Non-Chargeable) Outsourcing Internal Organizations

Full Outsourcing is also available as a business practice for industries to outsource the
manufacturing of standard or configured assemblies to the affiliated companies
belonging to the same organization. An existing manufacturing organization can be
enabled as an internal MP organization as and when required depending on the
business need. The internal MP organization can operate as a normal manufacturing
organization catering to other manufacturing needs other than the internal
manufacturing operation's needs.
The OEM and MP can belong to different operating units in the same or different
ledgers/legal entities. All feature functions like Discrete Jobs, Flow Schedules, WMS,
EAM, Serial Tagging etc are supported. Oracle Process Manufacturing enabled
organizations are not supported.
The typical business scenarios in which MPs are defined as Internal are:
• Wherein one organization acts as an OEM and another organization an internal MP
organization while both belong to the same Legal Entity/Operating Unit.
• Wherein one organization acts as a MP for the OEMs within the same or different
Legal Entity/Operating Unit.
• Wherein due to capacity constraints, the OEM organization sources from an

internal MP organization belonging to the same or different Legal Entity/Operating
Unit etc
To support Full Outsourcing with Internal Organizations, the Full Outsourcing

architecture for external organizations is used and all features and functions of any
Overview 1-9
inventory organizations are supported in Internal MP Organizations with the restriction
that the costing method should be Standard Costing only.
Note: Subcontracting components at MP organization item master level

should be costing disabled at item level. In case Internal MP
Organizations have common components e.g. components with same
item code, some quantity supplied and owned by OEM and some that
the MP procures and owns from external suppliers, such
subcontracting components can be defined as costing enabled.
However such components should be stored in expense sub-inventory
and consumed from the same sub-inventory for proper accounting and
tracking purposes.
To define an organization as an internal MP organization select the check box for MP

organization and set the MP Type to Internal. Set the costing method in the
organization parameter as Standard and the Transfer to GL flag as Yes. All the costing
transactions from Internal Organizations can be transferred to GL like any other
inventory organizations.
As in Full outsourcing with external MP organizations, the subcontracting Variance
account is used for tracking the OEM's material at MP organizations. The same account
is used in place of COGS and PPV during shipping of subcontracting components and
at the receipt of Outsourced assembly respectively. This account is set up in shipping
network and used in the OEM Organization. Select Full in the Shipping Network
Subcontracting Type for internal MP organizations. See: Full Outsourcing Accounting
Process

Full Outsourcing Process (Internal MP Organizations)
The Full Outsourcing Process: Internal Organizations diagram describes full

outsourcing wherein the MP is defined as internal. The OEM and the MP are both setup
as Inventory organizations. The OEM organization sets up the MP as a Supplier and
Customer. The MP also sets up the OEM as a Supplier and Customer. The Outsourced
Assembly is represented as Item A and its subcontracting components are B, C.
1. Subcontracting orders and Replenishment purchase orders are created for the
prepositioned component item manually or from ASCP.
2. Interlock Manager is run to create Subcontracting Sales Orders, Discrete Jobs,

Replenishment POs for the Synchronized component in MP as well as
Replenishment SOs for synchronized and prepositioned component items in OEM.
As in Full Outsourcing with external organizations, the concurrent program
Subcontracting: Interlock Manager is run before running ASCP collection. This is
primarily for Reconciliation. During this run, the program examines all the open
Overview 1-11
subcontracting POs and creates or updates subcontracting sales orders of the
Outsourcing assembly A, and the WIP job /Flow schedule of the corresponding
outsourced Assembly in the Internal MP Organization.
For example, in a WIP job production order, the Subcontracting: Interlock Manager
associates the Subcontracting Sales Order and WIP job with the corresponding
Subcontracting Order. If the Subcontracting Order contains Synchronized ship
components, replenishment POs are created in the Supplier Organization and are
associated with the Subcontracting Order. Replenishment Sales Orders are created
in the OEM Organization and are associated with the Replenishment POs. If
Project/Task references are defined in the source PO, those references need to be
passed to WIP Job and Replenishment PO/SO.
3. The OEM then ships the Subcontracting components using the existing shipping
process. The MP ship confirms component items against the respective
replenishment SOs manually from OEM.
4. MP receives respective replenishment POs.

Internal MP Organizations receiving clerk receives the subcontracting components
manually in the MP Organizations. Components are not automatically received in
internal MP organization. The PO acts as a receiving document as the
replenishment PO price is always zero and is closed for invoicing, so there is no
accrual accounting and invoicing.
Note: Subcontracting: Interlock Manager concurrent program's

reconciliation step reconciles date changes and quantity changes
made after the previous Interlock Manager run:
• If the need by date on the Subcontracting Order is updated or
the Schedule ship date on the Subcontracting Sales Order for
the subcontracting components are updated, then the
corresponding subcontracting sales order, and WIP job needs
to be rescheduled. Also, the replenishment PO for the
subcontracting components needs to be updated.
• If the Quantity on the Subcontracting Order is updated, the

quantity on the corresponding Subcontracting Sales Order and
WIP job at the MP Organization needs to be updated. If there
are any shipment allocations, the allocations need to be
updated.
• If the Subcontracting Order in OEM Organization is cancelled

then the corresponding Subcontracting Sales Order and WIP
job in MP organization will also be cancelled.
5. Component items are issued and the discrete job is completed in MP,

Production Supervisor in MP organization can release the WIP job and execute it
like any other order in MP organization. Subcontracting components in MP can be
flagged as serial controlled or serial tagged as the business needs. Subcontracting
components can be either back-flushed or issued to the WIP job and then the Job
can be completed.
6. Upon completion of the final assembly, the MP ships the Outsourced Assembly A
to OEM against the Subcontracting Order. The OEM ship confirms the assembly
item A from MP against the same SO.
7. OEM receives assembly item A against the Subcontracting Order.
8. AP invoice is created in OEM to pay the MP for the value addition. ERS program is
run to create AP invoices for Subcontracting Order of the assembly A. This creates
invoices for Pay On Receipt.
9. AR invoice is created against the ship confirmed Subcontracting Sales Order

shipped from MP.
Comparing Outsourced Manufacturing (Subcontracting) Business Types
Characteristics Chargeable Buy/Sell Full Outsourcing

Subcontracting Subcontracting
Subcontracting Component sales is Ownership is No component sale.

Component provisional and transferred to MP Components are
Ownership ownership lies with after the components shipped to MP on
the OEM are shipped consigned basis, and
the ownership of
material is with OEM.
Country Specific Applicable to Japan, Applicable to all Applicable to all

Deployability Korea and Taiwan countries countries
Costing Method Available for Available for Available for

Standard Costs Orgs Standard, Average, Standard Cost Orgs
only FIFO and LIFO Orgs only
Payables/Receivables Mandatory Optional Not relevant as there

Netting are no sales invoices
for components
Overview 1-13
Accounting setup Requires additional Not relevant Requires setup for
setup for accounting accounting consigned
Subcontracting Subcontracting
components (revenue, components (COGS
receivables, COGS, and PPV)
and PPV)
Costs/Price setup Assemblies/Compone Not relevant Purchase price of the

consideration nts costs/prices need assembly will be the
to be setup to avoid Value addition
unrealized gain/loss
Major Features of Subcontracting

Subcontracting features include:
• Modeling of OEM and MP as inventory organizations to facilitate tracking and
simulation of subcontracting processes.
• Accounting transactions in the external MP org are not posted to the General
Ledger (GL) to avoid any unwanted financial impact.
• Chargeable Subcontracting support is only for Standard Costing Orgs and can
be deployed in Japan, Taiwan, and Korea. This is applicable for both the
Original Equipment Manufacturer (OEM) as well as Manufacturing Partner
(MP).
• Buy/Sell Subcontracting supports all costing methods and can be deployed in

any country.
• Full outsourcing for both internal and external MP organizations works only
with Standard costing method and can be deployed in any country.
• Separate tracking of accounting transactions and variances associated with

assembly purchases in OEM organizations by setting up:
• Subcontracting COGS, Subcontracting Revenue, Subcontracting receivables and
Subcontracting Variance (applicable to Chargeable Subcontracting)
• Subcontracting Intransit account (applicable to Full Outsourcing for tracking

inventory value at the MP site)
• Integrated planning (using ASCP) and subcontracting execution in discrete and

project manufacturing environments to manage and control processes throughout
the extended supply chain.

• Support for different types of component supplies both Pre-positioned and
Synchronized, including the ability to drop ship components to partner's site that
help in flexibly modelling the subcontracting process in varying business
conditions.
• Automatic creation of Discrete Jobs or Flow Schedules in the MP Org to simulate

assembly production at the MP's facility in response to a purchase order or a
blanket release (referred to as Subcontracting Orders in the subcontracting solution)
through a concurrent program referred to as Interlock Manager.
• Automatic creation of component purchase orders (referred to as Replenishment

Purchase Orders in the subcontracting solution) for purchasing components from
OEM and creation of corresponding component sales orders (referred to as
Replenishment Sales Orders in the subcontracting solution) for shipping
components to the MP through the Interlock Manager.
• Automatic allocation of the Replenishment Sales Order component supplies to

corresponding Subcontracting Orders for outsourced assemblies (for both external
and internal MP organizations) through the Interlock Manager.
• Automatic receipt of components in the MP Org based on in transit lead times

through a concurrent program referred to as Auto Receive Components eliminate
any manual effort involved in performing such transactions.
• Automatic completion of the discrete job, backflushing of components and

appropriate inventory balancing in the MP Org upon receipt of the outsourced
assembly in the OEM Org for ensuring accuracy of inventory records that better
planning and control through a concurrent program reffered to as Process
Receiving Transactions.
• Dedicated Subcontracting Workbench and Reports providing better tracking and

increased visibility throughout the subcontracting life cycle.
• Ability to manage subcontracting process exceptions (over or under consumption,

component and assembly returns, etc) helps in taking care of process variations and
discrepancies.
• Option to net subcontracting payables and receivables through the AP/AR Netting
feature streamlines the payment process and provides greater flexibility in
conducting business with partners.
• Support of lot and serial genealogy (Note that with external MP organizations, only
lot genealogy is supported).
• Enterprises can define and outsource Assemble to Order (ATO) and Configure to
Order (CTO) items from external or internal manufacturing partners. For example,
preconfigured or configure to order laptops/desktops, automotive components etc.
Overview 1-15
• Endeca support for internal MP organizations and configured assemblies.

2
Setting Up Subcontracting

• Overview of Setting Up Subcontracting
• Setting Profile Options
• Setting up OEM Organizations
• Setting Up Manufacturing Partner Organizations
• Defining Customers and Suppliers
• Associating Customers and Suppliers
• Setting Up Item Definitions
• Setting Up Bills of Material for Outsourced Assemblies
• Setting Up Specific Subcontracting Accounting for Chargeable Subcontracting
• Defining Specific Receivables Transaction Types for Chargeable Subcontracting
• Defining Specific Transaction Sources for Chargeable Subcontracting
• Setting Up Specific Order Management Transaction Types for Chargeable
Subcontracting
• Setting Up Standard Costs of Components and Assemblies for Chargeable
Subcontracting
• Defining Price Lists for Subcontracting Components
• Setting Up Purchase Price of an Outsourced Assembly
• Setting Up a Shipping Network
• Defining Sourcing Rules
• Defining Netting Agreements
Setting Up Subcontracting 2-1

Overview of Setting Up Subcontracting
The following sections describe the setup steps that are required for implementing
Chargeable Subcontracting, Buy/Sell Subcontracting, and Full Outsourcing.
Setup Steps
The key setup steps are:
1. Enable subcontracting profile options.
2. Define Customers and Suppliers.
3. Define OEM and MP Organizations, and associate customers and suppliers defined
in the previous step.
4. Define components and assemblies in both the MP and OEM organizations.
5. Define specific accounts, AR, and OM transaction types for execution and
accounting.
Note: This step is required only for Chargeable Subcontracting.
6. Define shipping networks between the OEM and MP, and enable subcontracting
relationships.
7. Setup AP/AR Netting Agreements (mandatory for Chargeable Subcontracting,

optional for Buy/Sell, and not required for Full Outsourcing).
Process Steps
The Subcontracting process includes these steps:
1. Creating a purchase order (referred to as Subcontracting Order) for buying the
outsourced assembly from the MP.
2. Creating a Discrete Job in the MP Organization or a Flow Schedule (for assemblies

with flow routing) in Internal MP Organization against the Subcontracting Order
automatically, using the Interlock Manager.
3. Creating Replenishment Purchase Orders in the MP Organization for procuring

components from the OEM automatically using the Interlock Manager.
4. Creating Replenishment Sales Orders in the OEM Organization for shipping

components from OEM to MP automatically using the Interlock Manager.

5. Ship-Confirming Replenishment Sales Orders in the OEM Organization to ship
components to MP.
6. Running the Auto Receive Components concurrent program to automatically

receive the components in the MP.
7. Receiving the outsourced assemblies in the OEM Organization against

subcontracting orders created in Step 1.
8. Running the Process Receiving Transactions concurrent program. This step

completes the WIP job and backflushes the components and reduces the inventory
of the outsourced assembly by an appropriate amount in the MP Organization.
9. Performing batch netting for AP and AR invoices, for paying the MP. This is an
optional step for Buy/Sell Subcontracting and not required for Full Outsourcing.
This diagram illustrates the setup and process flow for Chargeable Subcontracting:
This diagram illustrates the setup and process flow for Buy and Sell Subcontracting:

This diagram illustrates the setup and process flow for Full Outsourcing with External
MP Organizations:

This diagram illustrates the setup and process flow for Full Outsourcing with Internal
MP Organizations:

Setting Profile Options
You must enable these profile options:
• JMF: Enable Subcontracting
• Subcontracting Enabled
You must enable both profile options simultaneously at the site level.
User Sys Sys Sys Sys

Admin Admin Admin Admin
Profile Option User User Resp App Site Required Default

Value
JMF: Enable - - - - Yes No No

Subcontracting
Subcontracting - - - - Yes No No
Enabled

Yes You can update the profile option
- You can view the profile option value but you cannot change it.
No You cannot view or change the profile option value.
JMF: Enable Subcontracting

This profile should be set to Yes to use the subcontracting features. You can update this
profile option at the site level only.
Yes: Enables Subcontracting.
No: Disables Subcontracting.
Subcontracting Enabled
This profile should be set to Yes to consider outsourced assembly item invoices in AP
and AR Netting. You can update this profile option at the site level only.
Yes: Enables Subcontracting AP/AR Netting
No: Disables Subcontracting AP/AR Netting
Related Topics
See: Profile Options, Oracle E-Business Suite System Administrator's Guide - Maintenance.
Setting up OEM Organizations

Define and set up the Original Equipment Manufacturer (OEM).
The OEM organization is the organization that buys an outsourced assembly, and ships
subcontracting components to the manufacturing partners.
To set up OEM organizations:

1. From the Inventory responsibility, navigate to the Organization window.
2. Define the OEM organization as an inventory organization. Select the Location

Address of the country for which you are setting up Chargeable Subcontracting or
Buy/Sell Subcontracting or Full Outsourcing.

3. Select Others. The Additional Organization Information window appears.
4. Select Inventory Information to view the Organization Parameters window.

5. Select the Costing Information tab.
6. Set the Costing Method of the OEM Org as below:

• For Chargeable Subcontracting, set the Costing Method to Standard.
• For Buy/Sell Subcontracting, set the Costing Method to any of the following
costing methods: Standard, Average, FIFO and LIFO.
• For Full Outsourcing set the Costing Method to Standard.
7. Since the OEM is a regular inventory organization, select Yes for Transfer to GL to
post all accounting transactions to the general ledger.
Note: Warehouse Management (WMS) and EAM-enabled

organizations are supported as OEM organizations. You can assign
or define outsourced assemblies and subcontracting components
for these organizations. Process-enabled organizations are not
supported.

8. Save your work.
For additional information about organization setup, see: Defining
Inter-Organization Information, Oracle Inventory User's Guide and Organization
Parameters Window, Oracle Inventory User's Guide.
Setting Up Manufacturing Partner Organizations

To use the Chargeable, Buy/Sell Subcontracting and Full Outsourcing features, define
the Manufacturing Partner Organization.
To set up MP organizations:
1. Navigate to the Organization window.
2. Define the MP organization as an inventory organization. Select the Location

Address of the country for which you are setting up Chargeable Subcontracting or
Buy/Sell Subcontracting or Full Outsourcing.
3. Click Others. The Additional Organization Information window appears.

4. Select Inventory Information. The Organization Parameters window appears.
5. In the Organization Parameters window, check the Manufacturing Partner

Organization indicator to select the Manufacturing Partner Type.

6. Select Manufacturing Partner Type as either External or Internal.

7. Select the Costing Information tab.
8. Select No for Transfer to GL if the MP organization type is external as the MP

organization is created for simulation and the accounting transactions for this
organization should not be transferred to the general ledger.
Select Yes for Transfer to GL if the MP organization type is internal to transfer
accounting transactions for this organization to the general ledger. For internal MP
organization types, the costing method in the organization parameter should be
Standard and Process Manufacturing Enabled should be not checked.

9. Save your work.
For additional information about setting up an Organization, see: Defining
Inter-Organization Information, Oracle Inventory User's Guide and Organization
Parameters Window, Oracle Inventory User's Guide.
To set up receiving options for MP organizations:

In both Chargeable and Buy/Sell Subcontracting practices, the MP procures
subcontracting components from the OEM. To support this, the system automatically
creates replenishment purchase orders and receives components in the MP
organization. Set up the receiving options in the MP organization to enable this.
1. From the Purchasing responsibility, navigate to the Setup/Organizations/Receiving
options page.
2. Select the MP Organization and click Go. The Receiving Options page appears.
3. Enter Receipt Days Early equals 100, Receipt days Late equals 100, and Receipt
Days Exceeded Action equals none.

4. Enter Over Receipt Tolerance equals 100 and Over Receipt Action equals none.
5. Enter Receipt Routing equals Direct Delivery.
6. Set Mandatory Accounts as miscellaneous accounts and leave all others blank. This
is because as the MP is created for simulation and the costs are not posted to the
general ledger, the accounts are not significant.
7. Save your work.
To define WIP parameters:

Define WIP Parameters for the MP organization. See: Defining WIP Parameters, Oracle
Work in Process User's Guide. Accounts are not significant; therefore, you can set the WIP
accounting class with miscellaneous accounts and then define it in the WIP Parameters
window. The system uses the supply subinventory defined in the WIP Parameters
window to receive the components when the replenishment purchase order is received
in the MP organization. The system also uses it to backflush the inventory when the
WIP job is completed for simulating the material consumption at the MP Organization
after the outsourced assemblies are received against the subcontracting purchase orders
in the OEM organization.
1. From the WIP responsibility, navigate to the Work in Process Parameters window.
2. Select the MP Organization.
3. Enter WIP parameters.

4. Save your work.
Defining Customers and Suppliers

When using the Subcontracting application, the MP acts as both supplier and customer,
and the OEM acts as a supplier. Define the OEM as a supplier/site, and the MP as both a
customer/site and a supplier, and associate these roles in the OEM and MP
organizations, respectively.
When using Full or Buy/Sell Outsourcing with Internal MP organization, both the MP
and the OEM act as supplier and customer. Define a customer and a customer site and a
supplier and a supplier site for both OEM and MP. If the OEM and MP belong to
different Operating Units in the same or different ledgers/legal entities, then create
customer/supplier sites with the same names in both the operating units.
For additional customer setup information, see: Adding Customers, Oracle Order
Management User's Guide.
To define a customer/site:
1. From the Order Management responsibility, navigate to the Customers page.
2. Add your Manufacturing Partner as a customer/site.

To define a supplier/site:
Set up both the MP and the OEM as suppliers.
For additional supplier setup information, see: Entering RFQ Supplier Information,
Oracle Purchasing User's Guide.
1. From the Purchasing responsibility, navigate to the Suppliers page.
2. Enter supplier information.

3. Save your work.
Associating Customers and Suppliers

For the OEM Organization, you must associate the supplier and supplier site. For the
MP Organization, you must associate the customer and customer site, as well as the
supplier and supplier site. The Advanced Supply Chain Planning (ASCP) application
uses this information to transfer the net demands of assemblies and components
between the OEM and MP organizations.
To associate customers and suppliers:

You must associate the supplier with the OEM. In this example, the OEM supplies
components to the MP and maintains the role of a supplier.
2. Select your OEM organization.
4. Select Customer/Supplier Association and click OK. The Customer/Supplier

Association window appears.
5. Enter the Supplier that you are associating with the OEM.
6. Enter the Supplier Site.

If using Full Outsourcing with Internal MP organization, where the OEM is defined
as customer/customer site and supplier/supplier site, enter customer/customer site
details for the OEM in the Customer/Supplier Association form.
7. Choose OK.
8. Save your work.
To associate customers and suppliers:

In this example, the MP supplies assemblies, procures components from OEM, and
maintains the role as both supplier and customer.
2. Choose the MP organization.
4. Select Customer/Supplier Association and select OK. The Customer/Supplier

Association window appears.
5. Enter Customer. This entry is the MP organization.
6. Enter the Customer Site to which to ship.
7. Enter the Supplier. This entry is the MP organization.
8. Enter the Supplier Site.

9. Click OK.
10. Save your work.
Setting Up Item Definitions

You must define items and bills in the OEM and the MP organizations. Define items as:
• Outsourced Assemblies: Assembly items designed by the OEM and manufactured
by the MP and the MP's site using components supplied by the OEM. Assemblies
can be standard or ATO/CTO outsourced assemblies. Users can also define and
configure ATO/CTO Items and outsource these Configured Assemblies to external
and internal MP Organizations.
• Subcontracting Components: Components sent by the OEM to the MP for the

manufacturing of outsourced assemblies. The two types of subcontracting
components supported are:
• Pre-positioned - Components that are shipped to the MP without reference to
any specific subcontracting order ahead of placement of such orders by the
OEM. These components are typically low cost items and the OEM stores these
components in larger quantities at Manufacturing Partner site well ahead of
ordering outsourced assemblies.
• Synchronized - Components that are shipped to the MP with reference to a

specific subcontracting order along with the order. These components are
generally high cost items and are shipped when the order is placed with the MP
and in the quantities required to produce the outsourced assembly in the
subcontracting order.
To define outsourced assemblies in the OEM organization:

You can follow the standard item setup steps for defining outsourced assemblies and
subcontracting components. The following key attributes and values are used for
defining an item as an outsourced assembly or a subcontracting component:

1. From the Inventory responsibility, navigate to the Organization Item window. The
Find Organization Items window appears.
2. Enter Item search criteria for the OEM organization and click Find. The
Organization Item window appears.
3. Select the Purchasing tab.
4. Define this item as an outsourced assembly by selecting the Outsourced Assembly

checkbox.
Note: You must set the profile option JMF:Enable Subcontracting to

Yes to enable the Outsourced Assembly checkbox.

5. Select the General Planning tab and define the outsourced assembly as a Buy item
for planning.
6. Select the MPS/MRP Planning tab and verify that Release Time Fence is empty
(Null). This setting allows ASCP to release and transfer buy planned orders of
assembly to purchasing as purchase orders or releases in the OEM organization.
Note: Outsourced Assemblies can have routings in OEM

organizations and it is not necessary to change the existing routings
while outsourcing the assembly to an MP.

7. Save your work.
To define outsourced assemblies in the MP organization:

2. Enter Item search criteria for the MP organization and click Find. The Organization
Item window appears.
3. Select the General Planning tab and define the outsourced assembly as a Make item
for planning. Production of this assembly is simulated in the MP organization.

4. Select the MPS/MRP Planning tab and select Do Not Release (Auto or Manual) for
Release Time Fence. This setting prevents Make planned orders of assembly from
being transferred as discrete jobs in the MP organization.
Note: Outsourced assemblies cannot have routings in MP

organizations.
6. Define this item as an outsourced assembly by selecting the Outsourced Assembly

checkbox.

Note: Outsourced assemblies cannot have routings in MP
organizations.
7. Save your work.
To define subcontracting components in the OEM organization:

2. Enter Item search criteria for the OEM Organization and click Find. The
3. Select the General Planning tab and enter the Subcontracting Component. Valid
values are Synchronized or Prepositioned based on the subcontracting process
requirement.

4. Select the MPS/MRP Planning tab and verify that Release Time Fence is empty
(Null). This allows ASCP to release and transfer planned orders of components to
purchasing as purchase orders or releases in the OEM organization.
5. Save your work.
To define subcontracting components in the MP organization:

2. Enter Item search criteria for the MP Organization and click Find. The Organization
Item window appears.

3. Select the General Planning tab and enter the Subcontracting Component. Valid
values are Synchronized or Prepositioned based on the subcontracting process
requirement.
4. Select the MPS/MRP Planning tab and enter Release Time Fence values:
Do not Release (Auto or Manual): Use this value when you use synchronized
components. ASCP should not release planned orders of synchronized components
in the MP organization.
Null: Leave this field empty when using pre-positioned components.
5. Save your work.
To define ATO/CTO item as configured assemblies:

2. Enter Item search criteria for the OEM organization and click Find. The
3. Select the Bills of Materials tab. For the ATO/CTO model item, ensure that the BOM
attribute Create Configured Item, BOM is set to Based on Model.
Note: This setup is required to create the configured Star (*) item,
BOM, and routing details in MP organization during the Star (*)
item creation process.

4. Select the Purchasing tab. Define this item as an outsourced assembly by selecting
the Outsourced Assembly checkbox. Outsourced Assembly flag for the star item is
copied in the MP organization.
Note: You must set the profile option JMF:Enable Subcontracting to

Yes to enable the Outsourced Assembly checkbox.
5. Save your work.
Note: When configuring ATO/CTO items, the process creates Star

(*) items, assemblies in both OEM and MP organizations. If the MP
is internal organization then routings are copied to MP
organization. Routings are not copied for external MPs
Supply chain Cost rollup program ignores sourcing rules and
considers component cost in OEM org for Cost rollup and this
program also updates list price of Star (*) Items with the OSP
charge.
When the subcontracting PO is created for the Star (*) Item
assembly, the list price is stamped as the PO price of the Star (*)
Item assembly in the Item Master.

Setting Up Bills of Material for Outsourced Assemblies
Bills of Material (BOM) must be set up for outsourced assemblies in both the OEM and
MP organizations. These two bills should be the same for proper planning and
execution. If the BOM already exists for outsourced assembly in the OEM organization,
then set up the same BOM in the MP organization. The prerequisites for outsourcing the
assemblies are:
• You must define all of the components of the outsourced assembly as
Subcontracting Components, either pre-positioned or synchronized in both OEM
and MP organizations.
• In the MP organization, select the Material Control tab and define BOM Component
and Supply Type as the following:
Assembly Pull: For physically shipping components to the

MP.
Phantom: For components not physically shipped but

used in planning.
Supplier Supplied: For components procured by the supplier

and used in the manufacturing of the
assembly.
Bulk: For defining software components in the

assembly.
Note: For Full Outsourcing with internal MP organizations all the

available supply types excluding Phantom and Supplier Supplied
are supported.

Setting Up Specific Subcontracting Accounting for Chargeable
Subcontracting
Subcontracting Accounting Process
The OEM ships components to the MP using a replenishment sales order for the
manufacturing of an assembly, but the revenue is not recognized as sales revenue. This
revenue is tracked in a separate account for analysis at a later stage.
The MP is not liable for the payment of components, therefore the OEM cannot consider
the receivables amount of the replenishment sales orders as actual receivables, and the
amount is tracked in a separate receivables account. COGS of Subcontracting
Components are also tracked in separate accounts. Purchase price of the assembly is set
up to include sales price of the components and the added value, which is always
different than the standard cost of the assembly. The Purchase Price Variance (PPV) at
the time of receiving the subcontracting order in the OEM organization is not a real
purchase price variance, and must be tracked in a separate account. You must set up
following accounts to use the subcontracting process:
• Subcontracting Receivables: Used to track the receivables from the sale of
components to the MP.
• Subcontracting Revenue: Used to track the revenue from the sale of components to
the MP.

• Subcontracting COGS: Used to track COGS from the sale of components to the MP.
• Subcontracting Variance: Purchase price variance at the time of receiving assembly

is posted to this account. This variance arises due to differences between the
standard cost and purchase price of the assembly.
See: Updating Balancing Segment Values, Oracle General Ledger User's Guide.
Setting Up Accounting for Full Outsourcing:

To set up accounting Full Outsourcing, use the same steps as Chargeable
Subcontracting but only set up the following account:
• Subcontracting Intransit: This is an asset account.
To define subcontracting accounts:

1. From the General Ledger responsibility, navigate to the Segment Value window.
The Find Key Flexfield Segment window appears.
2. Select the Value Set indicator and select the Value Set Name.
3. Click Find. The Segment Values displays all Values (Value Set).
4. Enter account details for the four Subcontracting accounts described previously.

5. Save your work.
Related Topics
Transaction Batch Sources, Oracle Receivables User's Guide
Defining Specific Receivables Transaction Types for Chargeable

Subcontracting
Define a separate receivable transaction type and associate:
• Subcontracting receivables
• Subcontracting revenue accounts (from the previous step). See: Setting Up

Subcontracting Accounting, page 2-30.
To define a receivables transaction type and associate it to

Subcontracting receivables:
1. From the Receivables responsibility, navigate to the Transaction Types window.
2. Enter the receivables transaction type details.

3. In the Name field, enter the transaction type of Subcontracting.
4. For the Receivable Account, enter the subcontracting receivables account for
tracking the subcontracting component receivable amount.
5. For the Revenue Account, enter the Subcontracting Revenue Account for tracking
subcontracting component revenue.
6. Save your work.
Related Topics
Transaction Types, Oracle Receivables User's Guide
Defining Specific Transaction Sources for Chargeable Subcontracting

Batch sources control the standard transaction type assigned to a transaction and
determine whether the Receivables application automatically numbers your
transactions and transaction batches.
To associate a subcontracting receivables transaction type with an order management
order type and line type, you must define a receivables transaction source. This step is
referred to when receivables invoices are imported from order management to accounts
receivable.
For transaction batch source setup information, see: Transaction Batch Sources, Oracle

Receivables User's Guide.
To define a subcontracting transaction source:

1. From the Receivables responsibility, navigate to the Transaction Sources window.
2. Enter the Transaction Source: Subcontracting.
3. Save your work.
Setting Up Specific Order Management Transaction Types for Chargeable

Subcontracting
You must set up a separate order type for creating replenishment sales orders for
component shipments to the MP.
Receivables Transaction Type, Receivables Transaction Source, and Subcontracting
COGS accounts created in previous steps must be associated with this Order
Management transaction type. When the replenishment sales order for the
subcontracting component is shipped and invoiced, COGS, revenue, and receivables are
posted to subcontracting COGS, subcontracting revenue, and subcontracting

receivables, respectively.
See: Accounting Setup.
To define Order Management transaction types:

1. From the Order Management responsibility, navigate to the Transaction Types
window.
2. Select an Operating Unit (required).
3. Enter a Description
4. Select an Order Category (required).
5. Select a Fulfillment Flow.
6. Enter Effective Dates (required).
7. Enter a Transaction Type (required).
8. Select a Sales Document Type.
9. Select a Transaction Type Code (required).
10. For Full Outsourcing, use Assign Line Flows to set up Ship Only transactions.
11. Select the Finance tab and enter an Invoice Source and a Receivables Transaction
Type and COGS account defined in the previous setup for subcontracting process.

Note: To associate a subcontracting AR transaction type with an
OM order type and line type, you must define a separate invoice
source and AR transaction type, and attach them to the OM
transaction type. This invoice source and transaction type are
referred to when an AR invoice is imported from OM to AR. See:
Transaction Types, Oracle Receivables User's Guide and Setting Up
Subcontracting Accounting, page 2-30.
Note: For Full Outsourcing, Receivables Transaction Type is

optional but COGs is mandatory and should be Subcontracting
Intransit account.
12. Save your work.
Setting Up Standard Costs of Components and Assemblies for Chargeable

Subcontracting
Set up the standard costs of subcontracting components and outsourced assembly in the
OEM organization. The MP organization is a simulation organization, and accounting
transactions are not transferred to GL. Therefore, no costing setup is required in the MP

organization.
Standard Cost of Subcontracting Components in the OEM Organization
Subcontracting components can be purchase items or assembly items. The cost is set up
like any standard component.
Standard Cost of Outsourced Assemblies in the OEM Organization
Standard cost of the outsourced assembly must include material cost and the added
value. While setting up the cost, include component cost as material cost and added
value as OSP (define an OSP resourced in the OEM organization and define an OSP
charge as added value) charges and run cost update.
To set up a standard cost of an outsourced assembly:

1. From the Costing responsibility, navigate to the Item Costs window and select an
OEM Organization. The Find Item/Cost Type window appears.
2. Click Find to open an existing assembly item and cost type, or click New to create a
new item cost. The Item Costs Summary window appears.
3. Fill Component costs as Material cost and Value addition as OSP (define OSP
resource before creating the cost).

4. Save your work.
5. Run Standard Cost Update to update the Frozen cost type with the Current cost
type.
Defining Price Lists for Subcontracting Components

Define Price Lists for Subcontracting Components for both Chargeable and Buy/Sell
Subcontracting. Sales price of the components are defined in the price lists and are
associated with Customer Ship To and Bill To sites of the MP organization (customer
sites represents the MP organization).
Sales Price of Pre-positioned Components
These components are shipped to the MP in bulk quantities in advance of the
subcontracting order requirements. You can create the replenishment purchase order
for these components in the primary UOM, or in a secondary UOM. Replenishment
sales orders are created based on its replenishment purchase orders. Therefore, the sales
order UOM is always the same as its corresponding replenishment purchase order
UOM. You can define price lists in either the primary UOM, or in the secondary UOM,
but only one UOM is effective at any point in time.
Sales Price of Synchronized Components
These components are shipped along with the subcontracting order. The Interlock
Manager creates replenishment sales orders of these components always in the primary
UOM of the component based on subcontracting order requirements. Since only

shipping of the components is always supported in the primary UOM, price lists are
always created in the primary UOM for synchronized components.
To define price lists:

1. From the Order Management responsibility, navigate to the Pricing, Price Lists,
Price List Setup, and Open Price List window.
2. Define price lists in the transaction currency of the MP.
3. In the List Lines tab, enter a subcontracting component code for defining the price.
4. UOM should be the primary UOM for synchronized components. UOM for
pre-positioned components can be either the primary or secondary UOM, however,
only one UOM is effective at any time.
5. Enter Values (prices) in the UOM.

6. Save your work.
Important: Do not define modifiers for subcontracting components.

The Subcontracting process does not work correctly if modifiers are
implemented.
To associate price lists with a customer site (MP):

1. From the Order Management responsibility, navigate to the Customers page.
2. Select the Business Purpose tab.

3. Navigate to the Ship-To Details page and associate the price lists defined in the
previous step.
4. Associate the price list to the Bill-to details.
5. Save your work.
Setting Up Purchase Price of an Outsourced Assembly

In Chargeable Subcontracting, the OEM ships components to the MP, but retains the
ownership of the components. When the OEM receives the assembly, the assumption is

that the components were returned from the MP and the inventory was adjusted
accordingly. The OEM makes payment to the MP for the added value after netting the
receivables invoices of the components shipped and receiving the payables invoices of
the outsourced assemblies. This requires that the purchase price of the assembly is
defined to include the components sales price and the added value in the
manufacturing process..
Assembly Purchase Price = [ ( Component quantity based on the Bills * Component
Sales price defined in the Price lists) + Value added during manufacturing of the
Assembly at the MP].
For example:
Net Value Add per unit of Assembly A at Partner's site = $5
Selling Price per unit of Component B on Price List=$4
Selling Price per unit of Component C on Price List =$6
Component usage per unit of Assembly A = 2 units of Component B, 1 unit of
Component C
Purchase Price per unit of A = [(2*$4 + 1*$6) + $5} = $19
Once the purchase price of assembly is calculated based on the bills and price lists,
setup should be:
• If the standard purchase order is used for procuring the assembly, then define the
calculated assembly price in the Organization Items window.
• If a blanket release is used, then define a blanket agreement with the assembly price
calculated as described previously.
The same reasoning can be applied to determine the purchase price of the outsourced
assembly for Buy/Sell Subcontracting.
For Full Outsourcing, the purchase price of the outsourced assembly is equal to the
value addition.
To set the purchase price of an outsourced assembly:

1. From the Inventory responsibility, navigate to the Organization Item window.
2. Enter an Organization and Item.
4. Enter the List Price.

5. Save your work.
Setting Up a Shipping Network

In Chargeable, Buy/Sell subcontracting, and Full Outsourcing components move from
OEM organizations to MP organizations, and outsourced assemblies move from MP
organizations to OEM organizations. To define inventory shipping networks between
the OEM and the MP:
• Define a shipping network to enable material flow from OEM to MP, selecting the
desired subcontracting relationship. Select Buy/Sell or Chargeable or Full from the
Subcontracting Type.
• Define a shipping network to enable material flow from MP to OEM. Select blank
from the Subcontracting Type LOV.
For additional information, see: Inter-Organization Shipping Networks, Oracle Inventory

User's Guide.
To set up a subcontracting shipping network:

1. From the Inventory responsibility, navigate to the Shipping Networks window.
2. Select the OEM Organization, and the Shipping Networks window appears.

3. Choose Find to open existing networks, or choose New to set up a new shipping
network. Select the Subcontracting tab.
4. In the Subcontracting Type field, select Buy/Sell or Chargeable or Full to define the
subcontracting relationship between the OEM and the MP.
The subcontracting relationship between the OEM and the MP for:
• Chargeable Subcontracting should be Chargeable.
• Buy/Sell Subcontracting with both external and internal should be Buy/Sell.
• Full Outsourcing with both external and internal MP organizations should be

Full.
5. Specify the Default Order Type to be used for creating replenishment sales orders,
and to ship components to the MP.
Note: For Chargeable Subcontracting, specify the default order type

as the Order Management transaction type defined in the previous
steps using subcontracting specific accounts. The Order
Management transaction type is used when the Interlock Manager
concurrent program in subcontracting creates replenishment sales
orders. For Buy/Sell Subcontracting, it can be a generic.

Note: In the Shipping Network from MP to OEM for internal MP
organizations, the order type field is enabled to populate the order
type for the subcontracting sales order of the assembly item to be
shipped from MP to OEM.
6. Select a Variance account for a Chargeable Subcontracting relationship to capture

and track Purchase Price Variance of outsourced assembly receipts separately.
Subcontracting Variance account set up on the Shipping Networks form will not be
applicable for Buy/Sell. Select Subcontracting Intransit as the account for Full
Outsourcing.
7. Select an Offset account that is used for reducing the outsourced assembly on-hand
quantity by miscellaneous issues, and is part of simulation. See the Subcontracting
Process chapter for additional details.
8. Choose Open to view details in the Shipping Network window for a selected line.

9. If you choose New, then the Shipping Network window appears and you can enter
additional network details.

10. Save your work.
Note: At any point of time, an OEM can either have a Buy/Sell or a

Chargeable Subcontracting relationship with a particular MP.
However, on the other hand, an OEM can outsource the same
assembly to multiple Manufacturing Partners by having either
Chargeable or Buy/Sell relationship
To set up a default shipping method:

The shipping network between two organizations should have at least one shipping
method defined for it. Out of these shipping methods, one should be made default.
1. From the Inventory responsibility, navigate to the Shipping Networks window.
2. Select the record for which you need to define shipping method. Select Shipping
Method from the Tools menu to navigate to the Inter-Org Shipping Networks
window.

3. Create shipping methods in the Inter-Org Shipping Networks window. Enter a
value for Intransit Time for each shipping method.

4. Ensure that you select one of the shipping methods as default by checking the
Default Method check box.
5. Save your work.

Defining Sourcing Rules
Sourcing rules and bills of distribution determine the movement of material between
organizations. These organizations include suppliers, manufacturers, and distribution
facilities. You must define sourcing rules and assignments for the OEM and the MP
organizations for planning purposes:
• In the OEM organization, define the sourcing rules to Buy components from the
RMS, if the OEM procures components from an external supplier, and to Buy
outsourced assemblies from the MP
• In the MP Organization, define the sourcing rules to Buy components from the
OEM, and Make assembly at the MP
Note: For the outsourced assembly item, if the OEM and MP belong
to different operating units within or across Ledger/Legal Entity,
create same supplier site names in both OEM and MP orperating
units:
1. In OEM Organization, while defining buy from sourcing rule
for the assembly, associate supplier/site of MP organization.
For components there is no change.
2. In MP organization, while defining sourcing rule for the

components, associate supplier/site of OEM organization. For
assemblies there is no change.
Advanced Supply Chain Planning (ASCP) creates Make or Buy planned orders based
on the sourcing rules.
For additional sourcing rules setup information, see: Defining Sourcing Rules, Oracle
Purchasing User's Guide and the Oracle MRP User's Guide.
Defining Netting Agreements

Netting agreements control how trading partners calculate net payables and receivables
transactions. You must set up netting agreements to enable netting calculations for
receivables invoices for components and for payables invoices for assemblies.
Note that while defining netting agreements is mandatory for Chargeable
Subcontracting, it is optional for Buy/Sell Subcontracting. Netting agreements are not
required for Full Outsourcing.
For additional Subcontracting Netting Agreement information, see: Netting Agreement,
Oracle Payables User's Guide.

To define netting agreements:
1. From the Payables responsibility, navigate to the Netting page.
2. Define the netting balance rule as Net When Payables Greater than Receivables.
This setting ensures that the OEM always pays the added value to the MP.
3. In the Payable invoice type, set the option Select only Invoices matched to Purchase
Orders with Outsourced Assemblies to Yes. This setting ensures that only payable
invoices of outsourced assembles are included in the netting process. This option is
available only when the Enable Subcontracting profile is set to Yes.
4. Set the Receivables Transaction type to be the same as the invoice source in the
Order Management transaction type. Receivable transactions stamped with source
are considered for netting.
5. Under Trading partners, enter the MP as both customer and supplier.

6. Save your work.

3
Subcontracting Process

• Subcontracting Planning
• Subcontracting Process Execution
• Subcontracting Concurrent Programs
• Interlock Manager
• Reconciliation Manager
• Auto Receive Components
• Process Receiving Transactions
• Processing Logic
Subcontracting Planning
The following sections describe the Subcontracting planning processes.
Note: Chargeable Subcontracting , Buy/Sell Subcontracting and Full

Outsourcing share the same subcontracting planning process.
Overview
In the Subcontracting solution, Advanced Supply Chain Planning (ASCP) plans the
component requirements in both OEM and MP organizations, and uses organization
definitions (customer supplier associations) and sourcing rules defined as a part of the
subcontracting setup steps. ASCP nets the demand and supply and creates planned
orders for the components and assemblies in both the OEM and MP organizations. The
setup for ASCP is the same as those of the standard planning setup for items. No special
setups are required for subcontracting.
The steps required to set up and run ASCP are summarized as follows:
Subcontracting Process 3-1

1. Add OEM and MP organizations to the planning instance.
2. Run collections and transfer data (items, sourcing rules, demand, supply, and so
on) to the planning instance.
3. Define Organization security to run the plans for the OEM and MP organizations.
4. Define forecast sets for outsourced assembly if the outsourced assembly is an

independent demand item. Otherwise, no forecast set definition is required.
5. Create and run the supply chain plans.
6. View the newly created planned orders by using the Planner Workbench.
For more detailed planning setup, refer to the Oracle Advanced Supply Chain Planning
User's Guide.
Outsourced Assembly with Synchronized Components

In this scenario, the outsourced assembly is A and its components, B and C, are
synchronized components.
The Planning process starts when:

1. The forecast is defined for an outsourced assembly in the OEM organization, if the
outsourced assembly A is an independent demand item. If A is a dependent
demand item, the demand comes from its parent assembly.

2. The planning run considers the forecast or dependent demand of A, calculates the
net requirements of A in the OEM organization, and creates buy a planned order
for assembly A in the OEM organization. A is a buy item and is sourced from MP
organization, based on the sourcing rule and Organization Supplier customer
associations. Therefore, the planned order demand of A in the OEM organization is
transferred to the MP organization as demand of A.
3. In the MP organization, A is a make item, demand is netted, and a make planned

order is created for Assembly A. When the BOM is exploded, components B and C
requirements are calculated, netted, and buy planned orders are created. Since these
components are sourced from the OEM organization (based on the sourcing rules,
supplier and site associations of the OEM organization), the buy panned order
demand for components B and C is transferred to the OEM organization.
4. In the OEM organization, components B and C requirements are netted because

these components are sourced from RMS (based on sourcing rules). Therefore, buy
planned orders are created for these components in the OEM organization.
5. In the OEM organization, buy planned orders can be transferred from Planning to
Purchasing as purchase requisitions. (The release time fence is set to Null for
outsourced assembly A, and components B and C in Organization Items.) Purchase
orders and blanket releases are created from these purchase requisitions. Purchase
orders and blanket releases created for outsourced assemblies are referred to as
subcontracting orders.
6. In the MP organization, make and buy planned orders of the outsourced assembly
A and components B and C cannot be transferred as WIP jobs or purchase
requisitions because the Release time fence is set to Don't Release Auto or Manual for
all of them in the MP organization. For these planned orders, the Attribute Action is
set to None, which prevents releasing these planned orders.
Note: You can view planned work orders using the Planner
Workbench.
The Interlock Manager concurrent request creates WIP jobs for assembly A and
purchase orders for components B and C during the simulation run. This topic is
discussed in detail in the execution section. These WIP jobs and purchase orders
represent supply and are considered in subsequent planning runs.
Outsourced Assembly with Pre-positioned Components

In this scenario, the outsourced assembly is A and its components, B and C, are
prepositioned components:

The planning process is the same as that of the outsourced assembly with synchronized
components. The only exception is that planned orders of pre-positioned components B
and C can be transferred to Purchasing as purchase requisitions:
1. The forecast is defined for the outsourced assembly in the OEM organization, if the
demand item, demand comes from its parent assembly.
2. The planning run considers forecast or dependent demand of A, calculates the net
requirements of A in the OEM organization, and creates a buy planned order for
assembly A in the OEM organization. Since Assembly A is a buy item and is
sourced from the MP organization, the planned order demand of A in the OEM
organization is transferred to the MP organization as demand of A.
3. In the MP organization, A is a make item based on the organization, demand is net

calculation, and a make planned order is created for Assembly A. When the BOM is
exploded, the requirements for components B and C are calculated, the net
calculated, and buy planned orders are created. Since these components are sourced
from the OEM organization, buy planned order demand of components B and C is
transferred to the OEM organization.
4. In the OEM organization, requirements for components B and C are netted because
these components are sourced from RMS (based on sourcing rules). Therefore, buy
planned orders are created for these components in OEM organization
Purchasing as purchase requisitions. (The release time fence is set to Null for
outsourced assembly A, components B and C in organization items). Purchase

orders and blanket releases are created from these purchase requisitions. Purchase
orders and blanket releases created for the outsourced assemblies are referred to as
6. In the MP organization, make planned orders of outsourced assembly A can be

transferred as WIP jobs as the release time fence is set to Don't Release Auto or
Manual for the outsourced assembly in MP organization. The make planned order
Attribute Action is set to None (it can be viewed on the planning workbench), which
prevents the release of these planned orders.
7. Buy Planned orders of components B and C can be transferred to Purchasing as

requisitions as the release time fence is set to Null for both the components in the
MP organization.
The Interlock Manager concurrent request creates WIP jobs for assembly A during the
interlock run. These WIP jobs represent supply, and are considered in subsequent
planning runs.
Outsourced Assembly with Prepositioned and Synchronized Components

In this scenario, the outsourced assembly is A and its components, B and C are
prepositioned and synchronized components respectively:
The planning process of the above process is a combination of the given processes
involving synchronized components and prepositioned components:
1. The forecast is defined for the outsourced assembly in the OEM organization, if the

demand item, then demand comes from its parent assembly.
2. The planning run considers forecast or dependent demand of A, calculates the net
the requirements of A in the OEM organization, and creates a buy planned order
for assembly A in the OEM organization. A is a buy item that is sourced from the
MP organization, therefore, the planned order demand of A in the OEM
organization is transferred to the MP organization as demand of A.
3. In the MP organization, A is a make item, demand is netted, and a make planned

order is created for Assembly A. When the BOM is exploded, components B and C
requirements are calculated, netted, and buy planned orders are created. Since these
components are sourced from the OEM organization, the buy planned order
demand of components B and C is transferred to the OEM organization.
4. In the OEM organization, components B and C requirements are netted, these

components are sourced from the RMS (based on sourcing rules), and the buy
planned orders are created for these components in the OEM organization.
Purchasing as purchase requisitions. Purchase orders and blanket releases are
created from these purchase requisitions. Purchase orders and blanket releases
created for the outsourced assembly are referred to as subcontracting orders.
6. In the MP organization, make planned orders of outsourced assembly A and Buy

Planned orders of Component C cannot be transferred as WIP jobs because
purchase requisitions as the Release Time Fence is set to Don't Release Auto or
Manual in the MP organization. The Planned Order Attribute Action is set to None
which prevents releasing these planned orders. You can use the Planner Workbench
to view the planned orders.
7. Buy planned orders of components B can be transferred to Purchasing as

requisitions as the Release Time Fence is set to Null for both the components in MP
organization.
The Interlock Manager concurrent request creates WIP jobs for assembly A and
replenishment purchase orders for component B during the interlock run. These WIP
jobs and replenishment purchase orders represent supply, and are considered in the
subsequent planning runs.
Subcontracting Process Execution

The Subcontracting execution process begins with the subcontracting orders for the
outsourced assemblies and the replenishment purchase orders for the components. The
following sections detail the process steps for each scenario.

Outsourced Assembly with Synchronized Components
In this scenario, the execution starts with the subcontracting orders being transferred
from ASCP. You can also create subcontracting orders manually.
1. The execution process starts with the subcontracting order of Assembly A. These
subcontracting orders are the standard purchase orders and blanket releases, and in
the shipments, the outsourced assembly attribute is set to Yes, indicating that the
purchase order is created for the outsourced assembly.
2. Interlock Manager picks up the subcontracting orders which were not processed in
the previous run of the subcontracting orders and performs the following:
• 2.1. The Interlock Manager creates a discrete job for the subcontracted order
quantity for simulating the manufacturing in the MP organization.
• 2.2. The OEM supplies components B and C which are required to manufacture
this assembly . Since B and C are synchronized components, (meaning that
these components need to be shipped along with the order), the Interlock
Manager creates a replenishment purchase order for the components with the
supplier associated with the OEM organization. The replenishment purchase
order created in the MP organization denotes the supply and is considered by
ASCP as supply.
• 2.3. The Interlock Manager also creates a replenishment sales order for shipping
the components in the OEM for the corresponding replenishment purchase
order in the MP organization. Replenishment sales orders created in the OEM

will always have reference to its corresponding purchase order in the MP
organization. Order type is retrieved from shipping networks (From Org: OEM
and To Org: MP). The subcontracting default order type and the components
price are picked from price lists associated with the customer site in the sales
order (defined in the price lists setup). Sales orders are always created with a
booked status and are ready for shipment. These replenishment sales orders are
allocated to the respective subcontracting orders to meet the component
requirements for manufacturing the assembly at the MP's site. (The Allocations
Table in the Subcontracting Data Model holds this information for tracking.)
3. Replenishment sales orders created for the subcontracting components are used for
shipping the components like any other standard sales orders.
4. The Auto Receive Components concurrent request picks up these shipments in the
OEM organization, and creates receipts in the MP organization against the
corresponding purchase order. Sales orders with shipped date and the in-transit
lead time (defined in the shipping networks default shipping method) that is less
than or equal to the current date, are automatically received to simulate the receipts
in the MP organization.
5. The MP manufactures the components and ships the manufactured assemblies to

the OEM, and the OEM receives these receipts like other purchase order receipts.
6. The Process Receiving Transactions concurrent request picks up these receipts in

the OEM organization and performs the following:
• 6.1. Completes the WIP job for the assembly. When the WIP job is completed ,
components are backflushed, and the inventory is reduced in the MP
organization. However, the completed assembly in the MP remains in
inventory.
• 6.2. Reduces the inventory of assemblies (completed through discrete jobs) in

the MP organization by performing by miscellaneous issues, to maintain the
accuracy of the inventory records. This is because, the subcontracting order of
the assembly is normally received in the OEM after the MP manufactures the
assembly and sends it to the OEM.The Offset account defined in shipping
networks is used for creating miscellaneous issues.
7. AR invoices are created for those components shipped to the MP.
8. AP invoices are created for subcontracting orders received from the MP.
9. In Payables, based on the Netting agreement, AP and AR invoices are netted and
payment is made to the MP.

Note: This step is optional for Buy/Sell Subcontracting and not
Outsourced Assembly with Prepositioned Components

In this scenario, process execution begins with the subcontracting orders for the
outsourced assembly and the replenishment purchase orders for the prepositioned
components transferred from ASCP. You can also create subcontracting orders for
outsourced assemblies and replenishment purchase orders for prepositioned
components manually.
1. The execution process begins with the subcontracting order of the Assembly A and
replenishment purchase orders of the prepositioned components. Subcontracting
orders are the standard purchase orders and blanket releases, and if the shipments
for the outsourced assembly are set to Yes, then the purchase order is created for
the outsourced assembly. Replenishment purchase orders are the standard
purchase orders or blanket releases created to simulate how MP procures
components from the OEM.
2. Interlock Manager concurrent request selects:

• 2.1. Replenishment purchase orders of the components in the MP, and creates
corresponding replenishment sales orders in the OEM for shipment of
components to the MP. Replenishment sales orders that are created in the OEM
always reference their associated purchase orders in the MP organization. The

order type is retrieved from default order type of the shipping network (From
Org: OEM and To Org: MP), and the components price is retrieved from the
price lists associated with the customer site in the sales order. Sales orders are
always created with booked status and are ready for shipment.
• 2.2. Interlock Manager then picks up the subcontracting orders that were not
processed in the previous run of the subcontracting orders and creates a
discrete job for the subcontracted order quantity for simulating the
manufacturing in the MP organization. For manufacturing this assembly,
components B and C are required in the MP organization, and the OEM must
supply those materials to the MP. Since B and C are prepositioned components,
meaning that components would have been shipped ahead of requirements,
Interlock Manager does not create replenishment purchase orders or sales
orders for these components. Instead, it looks for previously created and
unallocated sales orders, and then makes allocations to these requirements. If
unallocated replenishment sales orders are insufficient for the subcontracting
order requirements, then Interlock Manager allocates to the available quantity
and leaves the remaining quantity unallocated. (This situation should not
happen if replenishments are available). If replenishments are available, then
Interlock Manager attempts to allocate them in subsequent interlock runs.
3. Replenishment sales orders created for the subcontracting components are used for
shipping the components like any other standard sales orders.
4. The Auto Receive Components concurrent request picks up these shipments in the
OEM organization and creates receipts against the associated purchase orders in the
MP organization. Sales orders with shipped date and in-transit lead time (defined
in the shipping networks default shipping method) that is less than or equal to the
current date will be automatically received to simulate the receipts in the MP
organization.
5. The MP manufactures components and ships the manufactured assemblies to the

OEM, and the OEM receives these receipts the same as other purchase order
receipts.
6. The Receiving Transactions concurrent request picks up these receipts in the OEM
organization and:
• 6.1. Completes the WIP job for the assembly. When the WIP job is completed,
inventory.

the MP organization by performing miscellaneous issues, for maintaining the

assembly and sends it to the OEM. The Offset account defined in shipping
networks is used for creating miscellaneous issues.
7. Account Receivables invoices are created for the components shipped to the MP.
8. Accounts Payables invoices are created for the subcontracting orders received from
the MP.
Note: This step is optional for Buy/Sell Subcontracting.
Outsourced Assembly with Prepositioned and Synchronized Components

In this scenario, execution begins with the subcontracting orders of the outsourced
assembly and replenishment purchase orders of the pre-positioned components being
transferred from ASCP. Also, you can manually create subcontracting orders for the
outsourced assembly and replenishment purchase orders for the pre-positioned
components.
1. The execution process begins with the subcontracting order for assembly A and the
replenishment purchase order for prepositioned component B.
2. The Interlock Manager concurrent request:

• 2.1 Picks up the replenishment purchase for component B in MP and creates
associated replenishment sales orders in OEM for shipment to MP.
• 2.2 Interlock Manager then picks up the subcontracting orders that were not
processed in the previous run, and creates a discrete job for the subcontracting
order quantity. To manufacture this assembly, MP needs components B and C,
and OEM must supply those materials to MP.
Because Component B is a prepositioned component, Interlock Manager looks
for available replenishment sales orders and attempts to allocate them to satisfy
the subcontracting order requirement.
• 2.3. Because component C is a synchronized component, Interlock Manager

creates replenishment purchase order for this component.
• 2.4. Interlock Manager creates a replenishment sales order for component C

with its associated replenishment purchase order in MP, and then allocates the
sales order to the subcontracting order requirements.
Note: Replenishment sales orders are created for shipping the

components like other sales orders.
3. The Auto Receive Components concurrent request picks up these shipments in

OEM and creates receipts in MP using the associated purchase order. Sales orders
whose shipped date and In transit Lead time (defined in the shipping networks
default shipping method) are less than or equal to the current date will be
automatically received to simulate the receipts in MP organization.
4. MP manufactures the components and ships the manufactured assembly to OEM.

OEM receives these receipts like other purchase order receipts.
5. The Process Receiving Transactions concurrent request picks up these receipts in

OEM and:
• 5.1. Completes the WIP job for the assembly. When the WIP job is completed,
inventory..

the MP organization by performing miscellaneous issues, for maintaining the
assembly and sends it to the OEM. The Offset account defined in shipping
networks is used for creating miscellaneous issues..

The completed inventory of the assembly in MP is reduced by miscellaneous
issues which causes the inventory figures in the MP organization to be accurate.
The Offset account defined in shipping networks is used to create
miscellaneous issues.
6. Accounts Receivables invoices are created for components shipped to MP.
7. Accounts Payables invoices are created for subcontracting orders received from MP.
Note: This step is optional for Buy/Sell Subcontracting and not

Outsourced Assembly with Prepositioned and Synchronized Components (Internal MP

Organization)
In this scenario, execution begins with the subcontracting orders of the outsourced
assembly and replenishment purchase orders of the pre-positioned components being
transferred from ASCP or manually created. Subcontracting orders are created for
outsourced assemblies in OEM and corresponding subcontracting sales orders for the
outsourced assemblies are created in the internal MP organization by Interlock
Manager. All transactions in the internal MP organization are manual.

1. The execution process begins with the subcontracting order for assembly A and the
replenishment purchase order for prepositioned component B.

• 2.1 Picks up the replenishment purchase for component B in MP and creates
associated replenishment sales orders in OEM for shipment to MP.
• 2.2 Picks up open subcontracting orders and creates subcontracting sales orders
for Assembly A in the internal MP Organization
• 2.3 Creates the WIP job /Flow schedule for the subcontracting order quantity in
the Internal MP. It associates the subcontracting sales order and WIP job/Flow
schedule with the corresponding subcontracting order.
• 2.4 Creates replenishment purchase order for synchronized component C in

MP.
• 2.5. Creates a replenishment sales order for component C in OEM, and then
allocates the replenishment sales order to the subcontracting order
requirements.
3. To manufacture this assembly, OEM must supply materials to the MP. OEM then
ships the Subcontracting components B and C using the existing shipping process.
4. Components are not automatically received in internal MP organizations. MP

manually receives replenishment POs for components B and C.

5. Once the component items are issued, MP completes the discrete job/flow
schedules.
6. After Assembly A is complete, MP ships it to OEM.
7. OEM receives Assembly A against the subcontracting order.
8. Accounts Payables invoices are created for subcontracting orders received from MP.
9. Accounts Receivables invoices are created for components shipped to MP.
Subcontracting Concurrent Programs

These sections describe the Subcontracting concurrent programs:
• Reconciliation Manager
Interlock Manager
Interlock Manager is a concurrent request that should be run immediately after running
the ASCP plan and transferring the planned orders for outsourced assemblies and
subcontracting components to Purchasing. Interlock Manager picks up the
subcontracting orders and replenishment purchase orders and performs the following:
• Creates discrete jobs for assemblies and replenishment purchase orders for
synchronized components in the MP organization.
• Creates replenishment sales orders for pre-positioned and synchronized

components in the OEM organization only if the supply type is Assembly Pull.
Note: Components with supply type as Supplier Supplied,

Phantom, and Bulk will be ignored as they do not require
replenishment. Operation pull is not supported.
• Allocates the replenishment sales orders to the corresponding subcontracting order

to meet the component requirements at the partner's facility.
Attributes of Interlock Manager

Selection of Subcontracting Orders for Processing

Interlock Manager processes the subcontracting orders only if the following conditions
are satisfied:
• The MP organization can be WMS and EAM enabled. Process-enabled
organizations are not supported.
• For external MP organizations, only lot controlled outsourced assemblies or

components are supported. Both lot and serial controlled outsourced assemblies or
components are supported for internal MP organizations
• Inventory periods are open in the MP organization.
• WIP parameters are defined in the MP organization.
• Allocations
allocations refer to the designation of replenishment sales orders to the respective
subcontracting orders to meet the component requirements for manufacturing the
assembly at the MP's site. Allocations are required for the proper planning,
execution, and simulation of the manufacturing process at an MP site. In
Chargeable Subcontracting, although the components are shipped, the OEM retains
ownership. When the OEM receives assemblies from MP, it is assumed as though
the components are brought back from the MP when the OEM receives the
assemblies. To support this practice, the sales price of the components shipped or to
be shipped needs to be the same as the current list price. Also, the purchase price of
the assembly includes the sales price of the components. Including the sales process
is necessary in order to track the component consumption at the MP by the sales
price of the components.
When Interlock Manager makes allocations, it validates based on two conditions:

• Shipped components are available in the MP when the assembly is ready to be
manufactured (replenishment sales order shipment date and the in transit lead time
from the OEM to the MP is less than the discrete job start date).
• For Chargeable Subcontracting, sales price of the components shipped or to be

shipped is the same as the current list price.
When both conditions are satisfied, Interlock Manager allocates the replenishment
order to the subcontracting order. For synchronized components, replenishment sales
orders are created and automatically allocated at the same time. For prepositioned
components, components are shipped in advance of requirements to ensure that the
sales price of the components shipped is allocated at the correct price for proper
accounting.
Subcontracting Sales Orders Creation for Outsourced Assemblies in Internal MP
Organizations
In internal MP organizations, once the assembled item has been manufactured against
the WIP job or Flow Schedule, it needs to be shipped to the OEM organization. A

subcontracting sales order document is required against which the assembled item can
be shipped.
The Subcontracting: Interlock Manager, creates a Subcontracting Sales Order in the MP
organization linking to the Subcontracting Order created for the outsourced assembly in
the OEM organization. This enables the end to end traceability of the material
movement across the OEM and MP organizations.
Subcontracting: Interlock Manager creates a subcontracting sales order for an
outsourced assembly in the internal MP Organization to enable shipment of the
outsourced assembly from internal MP organization to the OEM organization after the
completion of the manufacturing of the assembly in the MP organization. While
creating the subcontracting sales order following are the mandatory fields that default:
• Customer/Customer site – from the customer/supplier relationship defined in
Customer/Supplier Association in Additional Organization Information.
• Order type – from the shipping network.
• Price list – from customer master.
• Warehouse – MP organization.
• Schedule Ship Date – Need by date on Subcontracting Order and Shipping Lead
Time in shipping network. This will also be the completion date on the work order.
To run Subcontracting: Interlock Manager

1. From the Subcontracting responsibility, navigate to the Requests window.
2. In the Name field, select Subcontracting: Interlock Manager.
3. Click OK. The Parameters window appears.

4. Enter these optional parameters:
• Batch Size
• Maximum Workers
• Subcontracting Organization From
• Subcontracting Organization To
5. Click OK.
6. Click Submit in the Subcontracting Requests window to run Interlock Manager.

Reconciliation Manager
The Reconciliation Manager concurrent request processes the change management of
subcontracting orders. It identifies changes to the subcontracting orders and updates
the discrete jobs, replenishment purchase orders, and replenishment sales orders.
These changes to subcontracting orders are considered for reconciliation:
• Subcontracting order quantity
• Promise or need-by dates
• Both quantity and dates
• Replenishment sales orders
• Cancellations
Change in the Subcontracting Order Quantity

Reconciliation Manager considers the change in the subcontracting order quantity and
any increase or decrease in the quantity of the discrete job associated with the
subcontracting order in the MP organization.
• If the subcontracting order is increased:

• For synchronized components, new replenishment purchase orders and sales
orders are created for any additional quantity for shipment of additional
material from OEM to MP and then they are allocated to the subcontracting
order.
• For pre-positioned components, if sufficient unallocated replenishment

quantity currently exists, then additional allocations will be made for the
increased (additional) subcontracting order requirements. If the unallocated
replenishment quantity is not sufficient, then no new replenishments will be
created because by definition, these components are stored in advance and
shortages do not occur; therefore, reconciliation does not take any action.
• If the subcontracting order quantity is decreased:

• For synchronized components, allocations are decreased, leaving some
unallocated replenishments. These replenishments are allocated to other
requirements. Interlock Manager or Reconciliation Manager considers such
unallocated replenishments of synchronized components (similar to
prepositioned components), and then creates new replenishments.
• For prepositioned components, allocations are decreased.
Changes to the Promise or Need-by Dates

Reconciliation Manager considers these changes to the promise or need-by dates:
• If the date is moved forward:
• The discrete job associated with the subcontracting order is moved forward.
• The subcontracting orders (replenishment purchase orders and replenishment

sales orders for the components) and allocations are not changed.
• If the date is moved backwards:

• The discrete job associated with the subcontracting order is moved backwards.
If the new date is less than or equal to the current date, then the current date is
set as the new date.
• For synchronized components, associated replenishment purchase orders and

replenishment sales orders are moved backwards. If the new date is less than
the current date, then the date is moved back to the current date. The
synchronized components are allocated to the subcontracting orders.
Allocations are not changed.
• For prepositioned components, allocations are removed and then new

allocations are made based on the new due date.

Simultaneous Changes to Quantity and Dates
Reconciliation Manager:
1. Reconciles date changes.
2. Makes changes to the order quantity.
Changes in the Replenishment Sales Orders

Reconciliation Manager considers these changes to replenishment sales orders:
• Short shipments of the replenishment sales orders
• Replenishment sales order returns
• Over shipments
• Backorder sales orders
• Cancellation of replenishment sales orders
Interlock Manager considers changes to replenishment sales order quantities and dates.
Interlock Manager:
• Changes the allocations so that the new shipment quantity is reflected in the
subcontracting order requirements.
• Creates new replenishment sales orders, when applicable.
Note: In internal MP organizations, the following changes originating

from subcontracting orders in OEM organization are automatically
propagated to the corresponding subcontracting sales order, WIP
job/Flow schedules in the MP organization:
• Subcontracting Order quantity (both positive and negative)
• Promise or need-by dates (both forward and backward)
• Both quantity and dates
• Cancellations
The change is initiated at the source document only which in internal

MP organizations is subcontracting order.Note that reverse change
management is not supported.
APIs are provided for inclusion in the PO approval workflow to allow
or disallow the changes in the subcontracting order considering the
status of the downstream, subcontracting sales order and work

order/flow schedule status.
Changes to subcontracting orders are allowed only if:
• Work order status is Unreleased
• Subcontracting sales order header status is Entered or Booked
• Subcontracting sales order line status is Awaiting Shipping and

delivery line status is Ready to Release.
For any other status the changes on the subcontracting order is not
allowed. Refer to the Integration Repository for API details.
Auto Receive Components

The Subcontracting: Auto Receive Components concurrent request performs the
following:
• Automatically receives subcontracting components into supplier organizations after
the predefined in-transit lead time.
• Selects the shipped replenishment sales orders in the OEM organization based on
the MP organization specified in the concurrent request parameters window.
• Creates component receipts for the corresponding purchase orders in the MP

organization.
• Selects shipped sales orders that are expected to be received in the MP organization
after considering the in-transit lead time defined in the shipping networks.
• Selects shipping transactions against subcontracting replenishment sales orders in

the OEM organization after considering in-transit lead time defined in the shipping
networks.
• Creates receipts against corresponding replenishment purchase orders in the

supplier organizations.
You can run this request daily, weekly, or periodically to create receipts of
subcontracting components in the supplier organizations.
Note: You can track the status using the Subcontracting Workbench.
To run the Auto Receive Components concurrent request:

1. From the Subcontracting responsibility, navigate to the Subcontracting Requests

window.
2. Select Subcontracting: Auto Receive Components in the Name field.
4. Enter the Manufacturing Partner Organization and click OK.
5. Click Submit to run the request.
Process Receiving Transactions

The Subcontracting: Process Receiving Transactions concurrent request:
• Selects assembly receipts in the OEM organization and initiates WIP job
completions and miscellaneous issues to adjust inventory in the MP organization.
• Processes assembly returns, receipts, return corrections of assemblies, and RMA

receipts for components in the OEM organization.
To run the Subcontracting: Process Receiving Transactions concurrent

request
window.

2. Select Subcontracting: Process Receiving Transactions in the Name field.
4. Enter an optional Request ID. Valid characters are 0 through 9.
5. Enter an optional Group ID. Valid characters are 0 through 9.
6. Click OK.
Processing Logic
The Process Receiving Transactions manager picks up the subcontracting order receipts
and RMA receipts for replenishment sales orders in the OEM. Then it creates
corresponding transactions in the MP organization.
Subcontracting Order Receipts
Receipts are processed only if these conditions are satisfied:
• Subcontracting order is fully allocated
• Subcontracting is not over-received

Tip: The subcontracting order receipt tolerance should be zero so
that it will never be over-received.
Once the above conditions are satisfied, Interlock Manager:

• Completes the WIP job of the associated subcontracting order in the MP
organization and then:
• Backflushes the components and reduces the component inventory in the MP
organization.
• Moves the completed assemblies to inventory.
• Reduces the completed WIP job quantity in the previous step by miscellaneous
issue for the assembly in the MP organization. The offset account defined in the
subcontracting options in the shipping network is used for these miscellaneous
issues.
Subcontracting Order Returns (RTVs)

The Pickup RTV program processes the subcontracting order transactions in the OEM
organization and creates the following transactions in the MP organization:
• Increases the inventory of outsourced assembly in the MP organization using
miscellaneous receipts, which represent the return of assemblies from the OEM.
• Creates assembly returns (WIP returns) in the MP organization for the associated
discrete jobs, which:
• Reduces the assembly inventory in the MP organization for returns to the shop
floor.
• Reverses backflushed component transactions.
Note: In internal MP organizations for the return of outsourced

assembly items to MP due to quality, non-conformance or any
other issues, create RTV manually in OEM against the
corresponding RMA transaction in MP organization. For
component returns, the steps remain same as external MP
organizations.
Subcontracting Order Receipt and RTV Corrections

The Process Receiving Transactions concurrent request handles receipt and return
corrections for subcontracting orders in the OEM. It processes them as WIP completions
or WIP returns in the MP organization.
Replenishment Sales Order Returns (RMA Returns)

The Process Receiving Transactions concurrent request executes the following for RMA
returns associated with replenishment sales orders:
• Creates RMAs with references to the original replenishment sales order shipped to
the MP organization. Otherwise the RMAs are not considered for processing.
• Selects the RMAs linked to the replenishment sales orders and then creates RTV
transactions for the corresponding replenishment purchase order in the MP
organization.
These steps are performed for accurate simulation of inventory at the MP site.

4
Endeca Information Discovery
Outsourced Manufacturing Visibility Using Endeca

A business user can get complete and real-time visibility into the overall health of the
outsourced manufacturing business using the rich user interface powered by Endeca.
Various aspects of the business such as subcontracting order status, inventory balances,
financial position, and quality issues can be visualized intuitively using these interfaces.
Endeca Information Discovery 4-1

360 Degree View of Outsourced Manufacturing Business
Key Performance Indicators and metrics provide quick answers to simple business
questions like:
• How many subcontracting orders are delayed and which customers are impacted?
• What's the value of our material at manufacturing partner locations?
• What's the value of defective finished goods received from manufacturing partners?
• What's the value of uninvoiced subcontracting orders and replenishments?
• What are the value of outsourced products that had quality problems ?
Detailed analysis on any metric can be done using a comprehensive set of charts and
tabular data on the user interface. Using the guided navigation, search capabilities, and
tag clouds, the user can quickly get to the subcontracting orders that need immediate
attention. Outsourced manufacturing data across manufacturing partners is presented
together to allow for quick comparison to differences.
See: Oracle Outsourced Manufacturing Extensions for Oracle Endeca, Oracle E-Business
Suite Extensions for Oracle Endeca Integration and System Administration Guide.

5
Subcontracting Workbench

• Overview
• Viewing Subcontracting Orders
• Viewing Replenishment Orders
• Consumption Adjustments
• Processing Consumption Adjustments
• Entering Component Lots
Overview
The Subcontracting Workbench User Interface enables you to view subcontracting
orders and replenishment orders and helps you take appropriate actions for better
control of the subcontracting process. Use the workbench to:
• View subcontracting orders
• View replenishment information for components
• Create manual shipment allocations
• Adjust subcontracting component consumptions
Related Topics
Viewing Subcontracting Orders, page 5-1Viewing Replenishment Orders, page 5-4
Viewing Subcontracting Orders

On the Components page of the Workbench, you can search and view Subcontracting
Subcontracting Workbench 5-1

Orders by manufacturing partner, or by an assembly. If you are using Project
Manufacturing, then you can also search and view the subcontracting orders by project.
These subcontracting orders are regular purchase orders and releases created for
outsourced assemblies. You can view header details in the Workbench.
Subcontracting order lines contain details of the outsourced assembly ordered through
the MP.
Details of the components required for manufacturing the outsourced assembly at the
MP's site can be viewed on the shipment details page.
To view subcontracting orders:

1. Navigate to the Subcontracting Workbench User Interface.
2. Select the Components tab.
3. Select the Subcontracting Order type from the list of values.
4. Enter an Operating Unit and Subcontracting Organization (required).
5. Additional search parameters include:

• Subcontracting Order and Order number, or Replenishment Order and Order
number
• Operating Unit
• Subcontracting Organization
• Outsourced Assembly
• Subcontracting Order Date From and To
• Manufacturing Partner
• Manufacturing Partner Site
• Purchase Order Status
• Allocation Needed
Enter additional search options as desired, and click Go.

6. Click the Shipment Details icon to navigate to the shipment details page. The
Shipment Details page displays the components to be shipped by the OEM to the
MP for manufacturing the assembly.
This page shows the details of component requirements and allocations for
manufacturing the assembly and list price (sales price) of the components at the
time of creating the subcontracting order.
7. Click BOM Detail to view the current BOM details of the outsourced assembly.

The Bills Of Material window appears and displays component details. This is
useful for comparing the components with the current BOM components in case the
components are different from the BOM due to revision change introduced after
creating the subcontracting order. You must cancel the subcontracting order and
then recreate a new subcontracting order and run the Reconciliation Manager and
Interlock Manager. The new subcontracting order and components are created with
the new BOM.
Viewing Replenishment Orders

On the Components page of the Workbench, you can search and view replenishment
orders created in the OEM organization for shipping components to the MP. You can
search for replenishment orders by MP, by component, and by project. On the
Components page:
• Search results display as replenishment order headers
• When selecting a specific order, you can view the replenishment sales order lines
for shipping the components. For synchronized components, the replenishment
order is allocated to one subcontracting order for the outsourced assembly. For
pre-positioned components, the replenishment order is generally allocated to
multiple subcontracting orders.
• Click Allocate Components to view and create allocations
The Subcontracting workbench lets you manually allocate shipments if necessary.

To view replenishment orders:
2. Select the Replenishment Order type from the list of values.
4. Enter additional search options as desired, and click Go. The Components page
appears and displays a list of Replenishment Orders. The page also displays order
lines for selected orders.
To view and create allocations:

On the allocations page, you can view existing allocations that were created by Interlock
Manager, and create allocations manually if required. For synchronized components,
replenishment orders are always created for the required quantity of the discrete job
associated to a subcontracting order. These replenishment orders are always fully
allocated. For pre-positioned components, replenishment orders are created well ahead
of requirements, and are allocated periodically. As a result, these orders can have
unallocated quantities.
1. From the Components page, click Allocate Components. The Allocations page
appears and displays allocation details for the selected order.
2. Select the Existing Allocations tab to view details of the subcontracting orders
allocated to the current replenishment order.

3. Select the Available Subcontracting Orders tab to display a list of subcontracting
orders that require component allocations. For replenishment sales orders of
pre-positioned components, there may be unallocated quantity. If pre-positioned
components are not fully allocated, then you can manually allocated them in this
page.
4. Enter the quantity to allocate in the Allocate column and click Apply.
Consumption Adjustments
Subcontracting orders are executed based on the planned component requirements as
per the BOM of the outsourced assembly. It is assumed that the MP consumes the
components based on the planned BOM component quantity and Yield, and the
simulated inventory records of the MP organizations are processed accordingly.
However, the MP might consume more or less components for manufacturing the
assembly due to process variations, and the OEM must adjust the simulated records of
the MP organization for proper inventory and financial accounting.

The MP sends a report of actual material usage at the period end, and the OEM verifies
and adjusts the simulated records.
Use the Consumption Adjustments page to enter adjustments for the subcontracting
component based on reports sent by the MP. You can search subcontracting order
components by OEM organization, subcontracting order number, or component. Enter
the actual consumption of the subcontracting order component at the manufacturer
partner's facility.
The component adjustments reported through the workbench are further processed by
the Subcontracting Consumption Adjustment Manager concurrent request. It adjusts
subcontracting components on-hand quantity in supplier organizations, and adjusts
allocations between subcontracting replenishment orders and subcontracting orders.
To report consumption adjustments:

1. Navigate to the Subcontracting Workbench.
2. Select Consumption Adjustment.
3. Select Subcontracting Order or Component.
Note: If the adjustment type is by Subcontracting Order, then input

into the Purchase Order number is required. If adjustment type is
by Component, then input into the Component is required.
5. Enter additional search options as desired, and click Go. The Consumption
Adjustments page appears and displays subcontracting order line details.

6. Enter the adjustment amount, a reason for the adjustment and lot information for
the component (if applicable).
7. Click Save.
Note: The application displays required quantity based on the

BOM. Actual consumption will be the same as planned
consumption. You must enter the variation in the consumption. If
the consumption is more, then enter positive quantity in the
adjustment amount indicating more consumption than planned
quantity. If consumption is less, then enter quantity with a minus
(-) sign, indicating that quantity consumed is less than the planned
quantity.
Related Topics
Processing Consumption Adjustments, page 5-8
Processing Consumption Adjustments

The consumption adjustment processor processes adjustments entered on the
workbench. Allocations are readjusted, and WIP component issues or WIP component
returns are made to adjust the actual consumption of the simulated discrete job in the
MP organization.
Processing Logic
This program picks up the positive and negative adjustments of the components
entered on the workbench and process.

For positive component consumption adjustments, the program:
• Creates WIP issues for the discrete job associated with the subcontracting order in
the MP organization
• Increases allocations for the subcontracting order
• If there is not enough replenishment available,, then the program does not process
those adjustments entered on the workbench. This scenario probably will not occur
because adjustments are made at the end of a period, by which time the OEM
would have sent enough material to the MP for this additional requirement. This
scenario could occur if you enter only positive adjustments first. Therefore, we
recommend that you do not process all of the adjustments (positive and negative) at
one time.
For negative component consumption adjustments, the program:

• Creates WIP returns for the discrete job associated with the subcontracting order in
the MP organization
• Decreases allocations for the subcontracting order
To process consumption adjustments:

window.
2. Select Subcontracting: Process Receiving Transactions from the Requests window

and click OK. The Parameters window appears.

3. Enter an optional Batch Size. Valid characters are 0 through 9.
4. Optionally, enter a value for Maximum Workers. Valid characters are 0 through 9.
5. Click OK.
Entering Component Lots

On the Components Lot Entry page of the Workbench, you can search for and enter lots
information for lot controlled components for external MP organization. This is
required to enable back-flush of the component lots to the work order created in MP for
the outsourced assembly. For the components that are lot controlled, once the assembly
is received (and delivered) in the OEM organization, you need to enter the lot
information for the components.
Note: This step should be performed before running Process Receiving

Transactions program.
You also need to enter lot information when assemblies are returned to the external MP
organization after the Auto Receive Components is run for MP organization.

To enter lots for components:
2. Select the Component Lot Entry tab.
3. In the Received Assemblies page select Issue or Return from the Transactions Type
list of values.
5. Enter additional search options as desired, and click Go.

The list of received outsourced assemblies for external MP organizations
appears.Note that these are only the received assemblies for which lot information
has not been entered and finalized.
6. Select a subcontracting order and click on Enter Component Lot.
The header information captures details of the subcontracting order, receipt

number and line number, outsourced assembly name and description, and
quantity. Details of the components appear in the Subcontracting Component Table
7. To enter lot information, select a component.
8. The Quantity field defaults the total component quantity to be issued. Update the
quantity of the component and respective lot as required.
9. In the Lot field, select a lot from the list of values which lists the lots with onhand
quantity in the external MP organization.

10. Use Add More Lots to enter lot information if the assembly has components with
multiple lots. Select the component and click Add More Lots to add a new row
which defaults the remaining quantity. Select the appropriate lot.
11. Use Remove to remove a selected component the table.
12. Use Reset to reset the information for a selected component.
13. Use Cancel to return to the Received Assemblies page without saving the changes.
14. Click Apply to save the changes

15. Confirming the changes returns you to the Received Assemblies page. The
information for the Component Lots are saved and entered but not finalized. To
update the entered data for Lot information, select Enter Component Lots.
16. Before finalizing the lot information entered ensure that the sum of the lot
quantities match the total component quantity to be issued which defaulted in the
Quantity field.
Click Finalize to complete the Components Lot Entry.

17. Click No to discard the entered lot information. Click Yes to confirm the finalization
of the entered lot data. Lot information cannot be modified after finalizing
component lot entry.

6
Subcontracting Accounting Process

• Chargeable Subcontracting Accounting Process
• Buy/Sell Subcontracting Accounting Process
• Full Outsourcing Accounting Process
• Additional Processes to Manage Subcontracting
Chargeable Subcontracting Accounting Process

The Chargeable Subcontracting Accounting Process considers the following:
• OEM ships components to the MP to manufacture the outsourced assembly, but
retains the ownership of the components.
Therefore, the MP is not liable for the payment for the components received from
the OEM.
• MP manufactures the assemblies (added value) from the OEM supplied

components, and ships them to the OEM.
• OEM receives the assemblies, and pays only the added value amount to the MP
organization.
Note: The MP organization is a simulated organization and is used for

inventory planning and tracking and has no impact on costing. For this
purpose, all accounting transactions in the MP organization are not
posted to the general ledger (The Transfer to GL is set to No for the MP
organization.)
For additional information, see: Setting Up Subcontracting Accounting, page 2-30.

Sales orders are used for shipping the components to the MP organization, and
Subcontracting Accounting Process 6-1

subcontracting orders are used to procure the assemblies from the MP. Invoices for
Accounts Payables and Accounts Receivables are netted, and the OEM pays the MP
only for the value added in the manufacturing at the MP's factory.
Key accounting concepts include:
• OEM makes a provisional sale and ships the components but retains the ownership.
Therefore, accounting transactions associated with shipping subcontracting
components should be tracked separately. These transactions are processed by
posting to the Subcontracting COGS, Subcontracting Revenue, and Subcontracting
Receivables accounts specifically defined for subcontracting, and are associated
with the OM transaction type. This transaction type is defined in shipping networks
and when the Interlock Manager creates replenishment sales orders for the
components, they are created with the OM transaction type defined in the shipping
networks. The respective accounts are posted during the execution of sales orders
for subcontracting components.
• At period end, the OEM must account for the component inventory in its book of
accounts. A report is provided to identify and calculate the component on-hand
inventory and the value based on the simulated records.
Important: You must manually enter the appropriate book of

accounts and reverse the same entry at the beginning of the next
period.
• The subcontracting order is used to procure the assembly from the MP. After
receiving the assembly from MP, the OEM nets the Accounts Payables invoices with
the Accounts Receivables invoices for the components shipped to manufacture the
assembly. OEM makes the payment to the MP for the added value amount. The
purchase price of the assembly is calculated based on the BOM requirement
quantity and sales price of the components.
See the sales price and purchase price setup of the components and assembly in
Chapter 2.
• The purchase price of the assembly is defined to include the sales price of the
components and added value amounts to support the payment process. Therefore,
any purchase price variances associated to assembly receipts in the OEM should be
tracked using a Subcontracting Variance account defined for subcontracting
purposes. This account is associated with shipping networks, and when purchase
order receipts are made, the purchase price variance is posted to the Subcontracting
Variance account.
• Since the entire process uses the fixed sales price of the components, the standard
cost of components and assembly, and the purchase price of the assembly, any
variations in the price and cost could affect the accounting process. A set of utilities
(that is, reports) is provided to identify these changes and their effect.

Important: You must manually adjust the accounting records for
consistency.
Costs and Prices

For subcontracting accounting, the costs and prices of the components and assemblies
should be defined such that the net gain arising out the virtual sales transactions will be
offset by the gain or loss associated with the purchasing of the assembly.
For details on setting up costs and prices, see Setting Up Subcontracting.
This figure illustrates the method for setting costs and prices. All amounts are in USD:
Item Material Cost OSP (Added Value by MP) Unit Cost
B 2 - 2
C 3 - 3
A 2*2 + 3*1 = 7 USD 5 12
Item Item Cost Sales Purchase Price Gain/Loss per 1 Ea of

Price Assembly A
B 2 4 N/A 2*(4 - 2) = 4
C 3 6 N/A 1*(6 - 3) = 3
A 12 N/A 19 19 - 12 = 7
Gain or loss by shipping Components B and C to the MP on a replenishment sales order

for manufacturing 1 each of Assembly A = 4 + 3 = 7 USD

Gain or loss offset by purchasing 1 each of Assembly A from the MP = 7 USD
The Original Equipment Manufacturer (OEM) should set up item prices so that the gain
or loss by shipping the components to the MP is offset the gain or loss associated with
the purchase of the assembly from the MP:
• Define material costs for the components. Define material and OSP charges for
assembly and update standard costs in the OEM organization. OSP charges are the
added-value amounts added by the MP organization. The costing in the MP
organization is of no significance.
• Define the sales price of the components and purchase price of the assembly so that
the gain or loss from the virtual sale of components to MP is offset by the purchase
price of the assembly. Gain or loss is the difference between the components sales
price and standard cost, and the offset is the difference between the purchase price
of the assembly and its standard cost. In addition, the difference between the
purchase price of assembly and the sales price of the component is the added-value
amount. After the OEM receives the assembly, it makes a payment to the MP
organization for the added-value amount.
• In the previous example, the respective standard cost of components B and C is 2

USD and 3 USD, and the respective sales prices are 4 USD and 6 USD. The sale of 2
units of B and 1 unit of C to the MP results in a virtual gain of 7 USD, 4 USD of
which is from B and 3 USD of which is from C.
To offset the virtual gain, the purchase price of assembly is set at 19 USD, and its
standard cost is 12 USD. The difference in the purchase price and standard cost is 17
USD, which offsets the virtual gain due to the sale of components.
• The net amount of the Accounts Receivables invoice is 14 USD, 8 USD of which is
for 2 units of B and 6 USD of which is for 1 unit of C. This net amount is calculated
against an Accounts Payables invoice in the amount of 19 USD and the balance of 5
USD, which represents the added value that is paid to the MP organization.
Replenishment Sales Orders Shipments

Accounting transactions associated with the provisional sale of components are tracked
in separate accounts.
At Ship Confirm Replenishment Sales Orders
This example shows the accounting entries at Ship Confirm: Components B and C. All
amounts are in USD:
Account Debit Credit
For Component B (2 each)

Deferred COGS (item cost 2 USD) 4 -
Inventory Valuation (item cost 2 USD) - 4
For Component C (1 each)
Deferred COGS (item cost 2 USD) 3 -
These are regular transactions. Although the inventory appears as a credit to the OEM
book of accounts, the OEM organization still owns the inventory. At the period end, run
a report and calculate the on-hand inventory and value at the MP site, and then adjust
the OEM books for proper accounting.
Invoicing Replenishment Sales Orders
This example shows the accounting entries for AR Invoice: Components B and C. All
amounts are in USD:
Subcontracting COGS (deferred amount 4 USD) 4 -
Deferred COGS (deferred amount 4 USD) - 4
Subcontracting AR (sales price 4 USD) 8 -
Subcontracting Revenue (sales price 4 USD) - 8
For Component C (1 EA)
Subcontracting COGS (deferred amount 3 USD) 3 -
Deferred COGS (deferred amount 3 USD) - 3
Subcontracting AR (sales price 6 USD) 6 -

Subcontracting Revenue (sales price 6 USD) - 6
COGS, revenue, and receivable transactions associated with invoicing replenishment

sales orders for subcontracting components are posted to subcontracting accounts for
tracking.
Subcontracting Orders Receipts

Subcontracting orders are the standard purchase orders or releases created to procure
the outsourced assemblies from the MP. Purchase orders include these events:
1. Receiving the assembly into the receiving location
2. Delivering the assembly to Inventory
All amounts are shown is USD.

Receiving for Assembly A
For Assembly A (1 each)
Inventory Receiving (PO Price 19 USD) 19 -
AP Accrual (PO Price 19 USD) - 19
These entries are similar to standard items.

Delivery for Assembly A
Inventory Valuation (Item Cost 12 USD) 12 -
Subcontracting Variance (PO Price - Item Cost) 7 -
Inventory Receiving (PO Price 19 USD) - 19

Inventory is debited at 12 USD, which includes the component costs and added value.
The purchase price variance is posted to the Subcontracting Variance account for
tracking.
AP Invoicing for Assembly A
AP Accrual 19 -
Accounts Payable (Outsourced Assembly) - 19
Accounting entries after the Accounts Payable invoice is created.

Once the Accounts Payables and Accounts Receivables invoices are ready to be
processed, you must use the Accounts Payable and Accounts Receivables Netting
functionality available in Oracle Payables, and make payments to the MP only for the
added value in the outsourcing process.
Accounts Payables and Accounts Receivables Netting
AP (Outsourced Assembly): 19 USD, Subcontracting AR:

14 USD
AP (Outsourced Assembly) 14 -
Subcontracting AR - 14
After netting Accounts Receivables, the amount of 14 USD is adjusted as a partial

payment, and the balance of 5 USD can be paid to the MP.
For more details on AP and AR netting, see the Oracle Payables User's Guide.
Buy/Sell Subcontracting Accounting Process

In Buy/Sell Subcontracting, the sale of subcontracting components and the purchase of
outsourced assemblies are treated as independent business transactions. They are
similar to standard sales and purchase of items. Therefore, the specific accounting of
subcontracting transactions required for Chargeable Subcontracting is not relevant in
the context of Buy/Sell Subcontracting. Also, Subcontracting Receivables and Payables
are generally not netted in Buy/Sell Subcontracting. The OEM pays the MP for

purchasing the outsourced assemblies and the MP pays for buying the subcontracting
components from the OEM. However, system allows for netting of Payables and
Receivables even for a Buy/Sell relationship.
Full Outsourcing Accounting Process

In Full Outsourcing, all the specific accounting steps required for Chargeable
Subcontracting are followed except that for Full Outsourcing you set up and define
Subcontracting Intransit (COGS) account in the Order Management transaction type,
and Subcontracting Intransit (PPV) in the Shipping Networks. Additionally,
Subcontracting Receivables and Payables are not netted in Full Outsourcing. The OEM
retains ownership of the components used to manufacture the outsourced assembly so
the MP does not explicitly pay for the Components. Keeping this in mind, the purchase
price of the assembly includes only the value addition and does not include the
component value supplied by the OEM.
Costs and Prices

This section describes the setups, and modeling for the costing, prices and accounting
of outsourced assemblies in Full Outsourcing in both external and internal MP
organizations.
Costing and Prices in External MP Organizations

For Full Outsourcing accounting for external MP organizations, the value addition
should be defined as OSP charges in the costing setup and the assembly purchase order
price should be the same as the value addition.
For details on setting up costs and prices, see Setting Up Subcontracting.
This figure illustrates the method for setting costs and prices. All amounts are in USD:
B $2 - $2

C $3 - $3
A 2*2 + 3*1 = $7 $5 $12
Item Item Cost Sales Price Purchase Price
B $2 N/A N/A
C $3 N/A N/A
A $12 N/A $5
To set up item prices, the Original Equipment Manufacturer (OEM) should:

• Define material costs for the components.
• Define material and OSP charges for assembly and update standard costs in the
OEM organization.
OSP charges are the added-value amounts added by the MP organization. The
costing in the MP organization is of no significance.
Costing of Outsourced Assemblies in Internal MP Organizations

In case of external MP organizations, Transfer to GL is set as No to exclude any
accounting that takes place in the organization. For internal MP organizations, however,
Transfer to GL can be set as Yes and subsequently, all transactions of the organization,
whether they are from the outsourced manufacturing flow, or otherwise, will be subject
to the principles of accounting and valuation.
Following are the notable transactions created in the MP organization as part of the
outsourced manufacturing flow:
• Purchase Order Receipt of subcontracting components
• Component issue of subcontracting components
• Assembly completion of Outsourced assembly
• Sales Order Issue of Outsourced assembly
The following setup is required for costing/accounting of the above transactions are:

• Price the replenishment purchase orders for the subcontracting components at zero
to prevent any accruals from being generated. The Interlock Manager concurrent
request is automated to handle above functionality.
• The replenishment purchase order is created with status of Closed for invoicing.
This is also, handled by the Interlock Manager concurrent request.
• Define the subcontracting components as costing disabled items in the Internal

Manufacturing Partner organization to prevent the generation of inventory
valuation when they are received and transacted within the MP organization.
Costing and accounting of an Outsourced Assembly
Item Cost in OEM
Item Material Cost Processing Charges Unit Cost
B $2 (Qty = 2 ton) $2
C $3 (Qty = 1 ton) $3
A 2 *$2 + $3 $5 $12
Item Cost in MP
Item Material Cost Processing Charges Unit Cost
B (Costing Disabled) $0 $0

C (Costing Disabled) $0 $0
A $0 $4 $4
Accounting Template for Transactions in OEM Organizations
Transaction Item Price/Cost Account Dr Cr
Ship Confirm Subcontracting Qty 2 @ $2 Inventory Valuation $4

of Component B
Replenishment
Sales Orders
Subcontracting $4
Intransit
Subcontracting Qty 1 @ $3 Inventory Valuation $3

Component C
Subcontracting $3
Intransit
PO Receipt of Outsourced Qty = 1 A/P Accrual $5

Subcontracting Assembly A
PO Cost = $12
PO Price= $5
Subcontracting $7
Intransit (PPV)
Inventory Valuation $12
Accounting Template for Transactions in MP Organization
Transaction Item Price/Cost Account Dr Cr
Receiving Subcontracting PO Price = $0 Accrual $0

Components B
&C

Receiving $0
Inspection
PO Receipt Subcontracting Cost = $0 Receiving $0

Component Inspection
Inventory $0
Valuation
Component Subcontracting $0 Inventory $0

Issue Component Valuation
WIP Valuation $0
Resource $4 WIP Valuation $4
Resource $4
Absorption
Assembly Outsourced Cost of WIP Valuation $4

Completion Assembly Subcontracting
components ($0) +
Value added
charge (=Cost of
MP owned
material +
Resources and
Overheads)
Inventory $4
Valuation
SO Issue Outsourced Value Added Inventory $4

Assembly Charge Valuation
Deferred COGS $4
COGS Outsourced Value Added Deferred COGS $4

Recognition Assembly Charge
COGS $4
AR Invoice Outsourced Selling Price Revenue $5

Assembly

Receivables $5
Note: If the subcontracting components specific to the outsourced

manufacturing flows are also being used by the internal manufacturing
partner for purposes other than outsourced manufacturing jobs for the
OEM, then users will have to setup the bill of material and inventory
(e.g. through usage of expense subinventories) to suppress the costing,
accounting and valuation of the component quantities.
Costing of Configured Outsourced Assemblies

The costing of the full outsourcing flow of configured assemblies is as follows:
• Users will have to setup the value addition charge as a resource on the Model's
BOM or as an OSP cost on the Model.
• The configured assembly in the OEM and MP organization will have its costs rolled
up like a make assembly, as per the BOM and the Routing. The cost in OEM will
include the cost of material and value added charge. The cost in MP will be equal to
only the value added charge, if it is an internal organization (See: Costing of
Outsourced Assemblies in Internal MP Organizations)
• The list price of the assembly in OEM will be equal to the value added charge.
For accounting, see: Costing of Outsourced Assemblies in Internal MP Organizations.
Replenishment Sales Order Shipments

Accounting transactions associated with the shipping of components to MP are tracked
in Intransit Account
At Ship Confirm Replenishment Sales Orders
COGS (item cost 2 USD) 4 -
For Component C (1 EA)

COGS (item cost 2 USD) 3 -
These are regular transactions. Although the inventory appears as a debit to the COGS
accounts, COGS is an intransit account, reflecting the value of the material at MP site,
but still owned by OEM. At the period end, use Endeca Information Discovery to view
the onhand at MP site. In this example, the Intransit Value of components is 7USD.
Invoicing Replenishment Sales Orders
Since the OM transaction type is Ship only, there won't be any AR transactions
generated.
Subcontracting Order Receipts

Subcontracting orders are the standard purchase orders or releases created to procure
the outsourced assemblies from the MP. Purchase orders include these events:
1. Receiving the assembly into the receiving location
2. Delivering the assembly to Inventory
All amounts are shown is USD.

Receiving for Assembly A
Inventory Receiving (PO Price 5 USD) 5 -
AP Accrual (PO Price 5 USD) - 5
These entries are similar to standard items.

Delivery for Assembly A

Inventory Valuation (Item Cost 12 USD) 12 -
Subcontracting Variance (PO Price - Item Cost) - 7
Inventory Receiving (PO Price 5 USD) - 5
Inventory is debited at 12 USD, which includes the component costs and added value.
The Purchase Price Variance is posted to Subcontracting Variance, which is the
Subcontracting Intransit account, reflecting the consumption of onhand inventory at
MP site. At this moment the net debit Value in the Intransit account is zero, showing the
Value of inventory at MP site as zero as they are consumed in the manufacturing of the
assembly and OEM receives the assembly.
Additional Processes to Manage Subcontracting

In Chargeable Subcontracting and Full Outsourcing, accounts are posted correctly if all
standard costs, sales price, and purchase price of the components and assemblies are
unchanged. These costs and prices could undergo changes due to various business
reasons such as an increase in the cost of raw material, changes to added value charges
etc., that force the OEM to make changes in the standard cost prices and also the sales
and purchase prices. This in turn influences accounting.
The following set of utilities and procedures are provided to help identify the impact of
those changes in advance and assist you in managing them for proper accounting:
• Standard cost updates
• Sales price changes
• Consumption adjustments
• Component returns
Standard Cost Updates

You must run the Cost Update Analysis report to find the impact of proposed cost
changes. This report gives the cumulative impact of all the components and assemblies
by the MP for the proposed cost change. You must make manual adjustments to the
general ledger accounts, and then update the standard costs of the components and
assemblies as follows:

For Chargeable Subcontracting:
• Debit the Inventory Valuation account if the value is positive
• Credit the Inventory Valuation account if the value is negative
For Full Outsourcing:

• Debit the subcontracting intransit account if the value is positive
• Credit the subcontracting intransit account if the value is negative
Sales Price Changes

The sales price of the components will generally be changed at the beginning of the
period. Like standard costs, changes in sales price will also affect gain or loss.
Note: This is applicable only for Chargeable Subcontracting. In Full

Outsourcing, replenishment sales orders are ship only sales orders and
no invoices are created so sales price changes do not have any impact
on accounting.
To null the impact of sales price changes, the OEM must:

1. Reconcile the inventory in the MP organization by using the confirmation report.
2. Make logical returns of the unallocated replenishment sales order quantity by

creating sales order returns (RMA). (Logical returns mean that the returns are made
in the OEM records, but the components are still physically located in the MP
organization.)
3. Change the component sales prices in the price list to the new sales price.
4. Create new replenishment purchase orders for the returned quantity and run the
Interloc Manager:
• Interlock Manager creates replenishment sales orders with the new price
• make logical shipments; components are still with the MP but shipments are
registered with the new price.
After this process, you can continue with the execution process.
Consumption Adjustments
Variances in the consumption of components over the planned consumption based on
the BOM are registered and processed using the consumption adjustment processing at
the MP organization. This process will adjust the on-hand inventory of simulated

records in the MP organization for planning and execution.
In Chargeable Subcontracting, the impact of the variances in OEM organization on
payments process must be handled manually.
In the case of over consumptions, the MP consumes more quantity than the planned
quantity, and the sales price of this excess consumption is not part of the purchase price
of the assembly. Consequently, the Accounts Receivables amount will be more than the
Accounts Payables amount and netting will suggest payments to the MP organization.
To overcome this situation, the OEM must create a credit note for the excess
consumption and then make payments for the value addition.
In the case of under consumptions, the MP consumes less than the planned quantity,
resulting in the Accounts Payable amount being more than the Accounts Receivable
amount, and netting will suggest paying more than the value addition. Creating a debit
note for the less consumption amount, and then paying only the value addition, can
resolve this condition.
Both the scenarios can be handled by using either by using proper netting setup or
manually.
See: Accounts Payables and Accounts Receivables feature in the Oracle Payables User's
Guide
In Full Outsourcing, the variances in the consumption at MP site results in the variation
in the onhand inventory value at MP site (tracked in the subcontracting intransit
account), which must be handled manually. You can do the following to adjust the
accounts:
1. Use Endeca Information Discovery, and take snapshot of onhand inventory Value
in MP site before adjustments.
2. Make adjustments.
3. Refresh Endeca Data and take the new snap shot of onhand inventory Value at MP
site after adjustments
4. Compare the inventory value at MP site, before and after the adjustments and make
the following adjustments:
• Debit the Inventory Valuation account if the adjusted value is positive.
• Credit the Inventory Valuation account if the adjusted value is negative.
Component Returns
The MP returns components to the OEM for various business reasons such as:
• Defective components

• Excess components due to better yield
• Obsolete components
• Logical returns due to price change differences in the standard cost at the time of
shipping the components and at the time
RMA receipts are created impact the gain or loss. Use the following procedure to null
any gain or loss due to returns:
• Run the Cost Update Analysis report with the Period End option to calculate the
gain or loss.
For Chargeable Subcontracting:

• Debit the Inventory Valuation account if the value is positive.
• Credit the Inventory Valuation account if the value is negative.
For Full Outsourcing:

• Debit the subcontracting intransit account if the value is positive.
• Credit the subcontracting intransit account if the value is negative.

7
Reports

• Reports Overview
• Subcontracting: Subcontracting Order Report
• Subcontracting: Confirmation Report (External Mode)
• Subcontracting Confirmation Report (Internal Mode)
• Subcontracting: Cost Update Analysis Report
Reports Overview
Oracle's Subcontracting provides reports for managing fiscal and internal control. You
can create your own layouts and publish your reports using Business Intelligence
Publisher.
Business Intelligence Publisher is a template-based publishing tool that is delivered
with the Oracle E-Business suite. This tool enables you to develop and maintain custom
report formats. You can design and control how your reports are presented by using
report templates. When you generate a report, Business Intelligence Publisher merges
report template files with report data to create documents that support numerous
formatting options, such as color, images, font styles, and headers and footers.
Subcontracting: Subcontracting Order Report

The Subcontracting Order Report prints purchase order information about outsourced
assemblies. In addition to printing purchase order report information (standard and
BPA release), this report prints information about components that are required for
manufacturing the assembly at the Manufacturing Partner (MP) site and replenishment
sales orders created for shipping the components to the MP for manufacturing the
assembly. The information in this report is grouped by subcontracting orders,
replenishments, allocations, and so on and is printed by subcontracting order.
Reports 7-1
Report Parameters
This table lists and describes the report parameters:
Parameter Require Default List of Values

d Value
Operating Unit (OU) Yes Current OU List of OU to which the user has access
Print Selection Yes - All, Changed, and New
Subcontracting Order Yes - PO Numbers

Number From
Subcontracting Order No - PO Numbers

Number To
Buyer Name and No - Buyer/Employee Name

Employee Number
Test No - Yes/No
Sort By No - Buyer/PO Number
Include Allocations Yes No Yes/No
Enable Fax No - Yes/No
Fax Number No - -
Dynamic Precision Option Yes 2 Precision
Print Canceled Lines No Yes Yes/No
Approved No - Yes/No
To run the Subcontracting Order Report:

1. From the Subcontracting responsibility, navigate to the Subcontracting Reports
window.
2. In the Name field, select Subcontracting: Subcontracting Order Report.
3. Enter an Operating Unit (required). The Subcontracting Parameters window

appears.
4. Enter report parameters and click OK. The Contracting Reports window appears.
5. Enter report request parameters and click Submit. You can view the report output
after the concurrent request completes.
Reports 7-3
Subcontracting: Confirmation Report (External Mode)
Use the Confirmation Report to reconcile inventory at the MP site at the end of the
period. During the reconciliation process, the Original Equipment Manufacturer (OEM)
prints the confirmation report in external mode to estimate the on-hand quantity and
the consumption of components for each subcontracting order based on the simulated
MP organization records. This report is sent to the MP for confirmation. The MP verifies
records and returns the report with variations to the consumption. The OEM then
adjusts the inventory in the simulated MP organization by making consumption
adjustments and processes the variations. The adjustments increase the accuracy of the
simulated records and reflect actual inventory at the MP for better planning and
execution.
Confirmation Report in External Mode
At the end of the period, the OEM prints the Confirmation Report in External mode and
sends it to the MP for component physical inventory in subcontracting. When a report

is printed in External mode, sensitive cost information does not appear on the report.
One report is created for each MP. The MP fills in the on-hand quantity and actual
consumptions of subcontracting components against subcontracting orders, along with
reasons for any discrepancies. The MP then returns the report to the OEM for
corrections.
The Confirmation Report prints:
• Estimated on-hand quantity by component based on the MP site simulation.
• Details of subcontracting orders that consumed components during a given period.

Estimated on-hand and consumption quantities are based on bills of material
quantities.
• Details of in-transit inventory (components shipped in OEM but not yet received in
the MP organization based on the simulation).
• Details of sales orders not yet shipped.
This report does not print cost information.

Report Parameters
Parameter Requir Default List of Values

ed Value
Report Mode Yes - External or Internal
Manufacturing Partner No - All manufacturing partners

From
Manufacturing Partner Site No - All sites of the MP

From
Manufacturing Partner To No - All manufacturing partners
Manufacturing Partner Site No - All sites of the MP

To
Subcontracting No - All subcontracting organizations

Organization From

Organization To
Reports 7-5
Parameter Requir Default List of Values
ed Value
Subcontracting Component No - All subcontracting components

From
Subcontracting Component No - All subcontracting components

To
Received Days Yes 10 -
Sort By Yes Supplier Supplier Site (Item when the mode is set
Site to External)
This value is always Supplier Site
Currency Conversion Type No - Defined types
Currency Conversion Date No - Calendar
To run the report in internal mode, refer to Subcontracting Confirmation Report

(Internal Mode), page 7-9.
To run the Subcontracting: Confirmation Report in External mode

window.
2. In the Name field, select Subcontracting: Confirmation Report.
3. Enter an Operating Unit (required). The Parameters window appears.

4. Enter report parameters and choose OK. The Subcontracting Reports window
appears.
5. Enter report request parameters and choose Submit. You can view the report output
Reports 7-7
Adjustment columns in the report (Pages 2 and 3) are left blank. The MP is expected
to enter the variations in these columns and return the report to the OEM.

Subcontracting Confirmation Report (Internal Mode)
The Subcontracting Confirmation Report (Internal Mode) is applicable only to
Chargeable Subcontracting. The Confirmation Report run in internal mode, calculates
on-hand inventory, and its inventory value is based on the standard in the OEM
organization. Component inventory is calculated based on the simulated records of the
MP organization, and the on-hand inventory is multiplied with its standard cost in the
OEM organization to arrive at the inventory value. The report prints:
• Component on-hand inventory
• Component standard cost
• Inventory value
The Confirmation Report for internal mode is run the same as external mode (see:
Subcontracting Confirmation Report (External Mode), page 7-4 for more details). The
Report Mode parameter must be set to External. All other parameters remain the same.
Reports 7-9
The report shows on-hand inventory at the MP site and its value based on the standard
cost of the component in the OEM organization.
Subcontracting: Cost Update Analysis Report

The Subcontracting Cost Update Analysis Report is applicable only to Chargeable
Subcontracting. In the Subcontracting application, the price of components and
outsourced assemblies is defined in such a way that gain or loss due to component sales
is offset by the Purchase Price Variance (PPV) of assembly receipts. A change to the
standard cost of either components or assembly creates an imbalance in gain or loss.
When costs of outsourced assemblies or subcontracting components are updated, you
must create adjustment journal entries to eliminate unrealized gain or loss. The Cost
Update Analysis Report shows the adjustment amount required for non-received
subcontracting items, unshipped subcontracting components, and returned
subcontracting components. You are responsible for creating adjustment accounting
entries.
The Cost Update Analysis Report provides the OEM with a way to estimate the effect
before the cost change. Based on this report, the OEM can adjust the general ledger
accounts manually and then run a standard cost update. You can estimate the effect of
the proposed standard cost by running the report with the Run parameter set to Before
Cost Update.
Cost Update Analysis Report (Before Cost Update)
The Cost Update Analysis report with the Before Cost Update option selected prints the
estimated effect of standard cost changes for both components and assemblies.

Report Parameters
Parameter Require Default List of Values

d Value
Cost Type Yes - All cost types

Organization From

Organization To
Run Yes Before Cost Before Cost Update or At Period End

Update
Currency Conversion No - All defined conversion types

Type
Currency Conversion Date No - Calendar
To run the Cost Update Analysis Report before a cost update:

window.
2. In the Name field, select Subcontracting: Cost Update Analysis Report.
3. Enter an Operating Unit (required). The Parameters window appears.
4. Enter report parameters and click OK. The Subcontracting Reports window
appears.
Reports 7-11
5. Enter report request parameters and click Submit. You can view the report output
Pages 2 and 3 show the effect of assembly standard costs, and page 3 shows the
effect of component costs. You must make general ledger entries based on the value
of the cost effect.
To run the Cost Update Analysis Report at the end of a period:

The Cost Update Analysis Report run at the end of a period prints the effect of
component returns due to the change in cost. The standard cost of the component can
be different at the time the component is shipped to the MP and at the time when
returns from the MP are realized. This difference causes imbalances in unrealized gain

and loss, and it must be estimated and adjusted at the end of the period.
The Cost Update Analysis Report at period end is run similarly to the Costs Update
Analysis Report before a cost update. In the Parameters window, select At Period End
in the Run field.
You must make general ledger entries to offset unrealized gain or loss.
Reports 7-13
8
Subcontracting For Seiban-Based
Manufacturing

• Overview of Seiban-Based Manufacturing
• Seiban-Based Manufacturing Setup
• Organization Setup
• Defining Cost Groups for MP Organizations
• Defining Seiban Numbers
• Organization Items
• Seiban-Based Subcontracting Planning
• Seiban-Based Subcontracting Execution
Overview of Seiban-Based Manufacturing

Oracle Subcontracting supports subcontracting in Seiban-Based Manufacturing. In
Seiban-Based Manufacturing, outsourced assemblies and components are planned
based on Seiban numbers (project numbers) using Advanced Supply Chain Planning
(ASCP) and hard pegging. The subcontracting process is also executed using
locator-controlled OEM and MP organizations and Seiban numbering.
The Subcontracting feature can be used in both discrete and Seiban-Based
Manufacturing environments. The following sections describe the additional setup and
execution steps required to use subcontracting in Seiban-Based Manufacturing.
Seiban-Based Manufacturing Setup

The setup steps described in the chapter Setting Up Subcontracting, apply to
Seiban-Based Manufacturing. The sections that follow are for planning components and
executing the subcontracting process using Seiban (project) numbers.
Subcontracting For Seiban-Based Manufacturing 8-1

Organization Setup
Inventory Parameters
For Seiban-Based Manufacturing, Locator Control should be defined as dynamic entry
allowed in Inventory parameters for both the OEM and MP organizations.
To set up Seiban inventory parameters:

1. From the Inventory responsibility, navigate to the Organization Parameters
window.
You use locator control to identify project inventory.
2. Save your work.
Project Manufacturing Parameters:

Define the OEM and MP organizations as Project Manufacturing Organizations by
adding Organization Classification as Project Manufacturing for both.

2. Navigate to the Project Manufacturing Parameters window, and click the General
tab.
3. Select the Enable Project References indicator.
4. Set Project Control Level to Project.

5. Save your work.
To define WIP parameters:

Seiban-Based Manufacturing uses locator-controlled subinventories for inventory
transactions. To support the simulation of discrete jobs in the MP organization, supply
subinventory should be a locator-controlled subinventory. Interlock Manager creates
WIP jobs with this subinventory as component subinventory for back flushing. The
Auto Receive concurrent program also receives components into this subinventory for
simulation.
1. Navigate to the Work in Process Parameters window.
2. Select the Material tab and associate Locator Controlled Subinventory as Supply
Subinventory. In addition, associate Supply Locator leaving Project/Task as blank.
(For details about Locators in PJM, refer to the Oracle Project Manufacturing User's
Guide.)

3. Save your work.
Defining Cost Groups for MP Organizations

You must define Cost groups and associate a WIP accounting class (defined at the time
of creating the WIP parameters for MP organizations). This action is required for
simulating WIP jobs by project numbers, and it is part of the Project Manufacturing
(PJM) setup.
See: Oracle Project Manufacturing User's Guide
The MP organization is a zero-cost organization, and transfer to general ledger is set to
No. Cost group setup is required to facilitate the simulation of assembly manufacturing
in the MP organization using discrete jobs and project numbers. This setup does not
have financial implications.
To define cost groups for MP organizations:

1. From the Cost Management responsibility, navigate to the Cost Groups window.
2. Define the cost group with Type set to Inventory. You can use any existing cost
group.

3. Click WIP Accounting Classes to define WIP Accounting Classes for this cost group
(use the same WIP accounting class defined at the time of defining WIP Parameters
of MP Organization). The WIP Account Classes for Cost Group window appears.

4. Save your work.
Defining Seiban Numbers

Before you plan and execute subcontracting in Seiban-Based Manufacturing
environments, you define project numbers.
To define Seiban numbers:

1. From the Project Manufacturing responsibility, navigate to the Seiban Wizard.

2. Select the Using Seiban Number indicator and click Next. The Seiban window
appears.

3. Enter Seiban (project) Numbers.

4. Save your work.
5. Click Parameters to define the parameters for the Seiban Number (project). The
Project Parameters window appears.

6. Select the General tab and enter Inventory Organizations that use the project
numbers. In this scenario, the OEM and MP organizations should be included.
7. Associate a cost group, which was defined in the previous procedure.
8. Associate a WIP Accounting Class. This value should be same as the WIP
accounting class associated with the WIP parameters of the MP organization.
9. Save your work.
Organization Items
In Seiban-Based Manufacturing, outsourced assemblies and components must be
defined as hard pegged items for planning and execution using Seiban numbers.
To define items as hard pegged:

1. From the Inventory responsibility, navigate to the Organization Item window.
2. Select the MPS/MRP Planning tab, and set the attribute Pegging to Hard Pegging.
This information is used to for planning the demand and supply by project
numbers.

3. Save your work.
All outsourced assemblies and subcontracting components should be defined as
hard pegged in both OEM and MP organizations.
Seiban-Based Subcontracting Planning

The steps and processes of planning are similar to those of discrete manufacturing.
For Seiban-Based Manufacturing, the differences are:
• Forecast must be defined by project.
• ASCP plans the components and assemblies by project. Demand and supply are
considered and calculated by project.
• Planned orders are created by project.
• Planned orders are outsourced as assemblies and pre-positioned components. They

are transferred to purchasing as purchase requisitions. The purchase orders are
created with project as shipment lines.
• For outsourced assemblies, the purchase order is called as a subcontracting order,

and the project number is stamped in the purchase order line shipment
distributions.

Note: Subcontracting Orders and Replenishment Purchase Orders of
the pre-positioned components should always have one Shipment and
Distribution for every purchase order line. Multiple shipments and
distributions are not supported. When you create subcontracting orders
and replenishment purchase orders manually, you can create multiple
purchase order lines. However, only one shipment and distribution is
allowed for each purchase order line. Interlock Manager discards
purchase order lines if it has more than one shipment or distribution for
each PO line, and it will not process them.
Seiban-Based Subcontracting Execution

The process for executing Subcontracting in the Seiban-Based Manufacturing
environment is the same as for discrete manufacturing.
Interlock Manager
The Interlock Manager concurrent request picks up subcontracting orders and processes
them by creating WIP jobs in the MP organization. Interlock Manager also creates
replenishment purchase and sales orders, and it allocates the replenishment sales orders
according to subcontracting order requirements in the same way described in the
Subcontracting Process chapter of this guide.
• Work In Process (WIP) jobs are created with Seiban (project) references

• Replenishment purchase orders and replenishment sales orders are created with
Seiban (project) references
• Allocations are made with the same conditions of shipment dates and price of
replenishment order, and the project number must be the same for subcontracting
orders and replenishment orders for allocation in the Seiban environment.

Same as Discrete Manufacturing
Subcontracting Workbench
Workbench functionality is the same as for Discrete Manufacturing. All search options
can be executed with a Seiban (project) number. The project number is available in
additional search options, and you can personalize the search and results to view them
by project number.
Subcontracting Accounting
In Seiban-Based Manufacturing, accounting is the same as discrete manufacturing.
Concepts and posting of accounts remain the same.
Reports
Seiban (project) numbers are printed with all the reports, and the remaining features
and functions are the same as for Discrete Manufacturing.

9
Subcontracting Business Flows

• Drop Ship Components from RMS to MP
• Modeling Components for Drop Ship
• Planning Drop Ship Components
• Process Execution Drop Ship Components
• Multi-Level Outsourcing
• Outsourcing Phantom Assemblies
• Outsourcing Lot and Serial-Controlled Items
Drop Ship Components from RMS to MP

Oracle Subcontracting application supports drop shipping of components from the Raw
Material Supplier (RMS) to the Manufacturing Partner (MP) from planning to execution
as follows:
• All components of the outsourced assembly must be drop shipped from the RMS to
the MP. Drop shipping of a few components of the outsourced assembly and
normal shipping of the remainder to the MP is not supported.
• Subcontracting components are drop shipped to all of the MPs if defined. Drop
shipping the same component to one MP and normal shipment to another MP is not
supported.
• Both prepositioned and synchronized components can be drop shipped to the MP
Modeling Components for Drop Ship

Item Definition
Subcontracting Business Flows 9-1

For drop shipment, replenishment sales orders created for shipping the components
from the OEM to the MP must have the source type as External. You can do this using
two setup methods:
Method 1: Define Item Attribute Default Sales Order source type as External and define
Order Management defaults so that this attribute is provided by default to the Sales
Order line source type.
Method 2: Define Source Type as External in the Order Management Transaction Type
window (this will be used for creating replenishment sales orders) and set Order
Management Defaulting Rules to provide this source type by default from Order
Management Transaction Type to the Sales Order line.
Also, define the Organization Item attribute Release Time Fence to Don't Release Auto or
Manual for subcontracting components in the OEM organization.
To define attribute Source Type in items:

1. From the Inventory responsibility, navigate to the Master Item window.
2. Select the Order Management tab and set Default SO Source Type to External.
3. Save your work.
To define OM default rules:

1. From the Order Management responsibility, navigate to the Defaulting Setup
window.

2. Search for default attributes:
• Application: Order Management
• Entity: Order Line
3. In the Attribute region, search for Source Type.

4. Click Defaulting Rules. The Attribute Defaulting Rules window appears.

5. Set defaulting conditions and rules for defaulting the Source Type from Items. See:
Oracle Order Management User's Guide for Order Management defaulting rules.
Shipping Lead Times from the RMS to the MP:

Define the shipping Lead Time from the RMS to the MP in the shipping networks
between the OEM and the MP. The application uses this lead time to simulate
component procurement and to automatically receive drop ship components in the MP
organization.
Others:
All other setup steps remain the same.
Planning Drop Ship Components

The planning functions for drop ship components are similar to those for standard
items. However, the planned orders of the components in the OEM organization cannot
be transferred as purchase orders because of the release time fence setup in the OEM
organization. Drop ship purchase orders are created from drop ship replenishment
sales orders for the components at a later stage for procuring components from the
RMS.

This diagram illustrates the planning process in a drop-shipment flow:
Process Execution Drop Ship Components

The process execution for Subcontracting is similar to that for standard items. Key
aspects include:
• Interlock Manager creates replenishment drop ship sales orders in the OEM
organization for components (based on the item and order management defaulting
rules setup.)
• Drop ship purchase orders are created from replenishment drop ship sales orders.
See: Drop Shipments, Oracle Order Management User's Guide
• When the RMS ships the components, the OEM is notified. The OEM reports the
drop ship purchase order of the components received, and it updates the drop ship
sales orders to Shipped status
• The Auto Receive Components concurrent request receives the components into the
MP organization based on the shipping Lead Time set in shipping networks of the
OEM and the MP.
• Payments to the RMS and the MP are similar to payments to standard purchasing
and subcontracting, respectively.

The details of the process are:
1. Planned Order of A in ASCP is released as a purchase order in the OEM.
2. Planned Order of B (prepositioned component) is released as a purchase order in

the MP.

• Picks the replenishment purchase orders of pre-positioned components B in the
MP, and creates a drop ship sales order for B in the OEM
• Picks purchase orders of outsourced Assembly A in the OEM and creates:

• WIP job for A in the MP organization
• Replenishment purchase order for Synchronized ship component C in the

MP and drop ship sales order for C in the OEM
• Makes allocations for the discrete JOB component requirements
4. Drop ship purchase orders are created from the drop ship sales orders.
5. The RMS ships components to the MP, and the OEM creates logical drop ship
purchase order receipts for components B and C in the OEM organization. This
action sets the corresponding drop ship sales order line status of B and C to
Shipped.

6. The Auto Receive Components concurrent request selects the component shipments
in the OEM and creates purchase order receipts in the MP.
7. Purchase Orders of outsourced assemblies are received in the OEM organization.
8. The Process Receiving Transaction Processor selects assembly receipts in the OEM
and completes the discrete job in the MP. This action also back flushes components
B and C in the MP.
Multi-Level Outsourcing
You can set up your system to outsource subassemblies at several levels of the final
assembly. In the following example, A is the final assembly containing subassemblies D,
B, and C. Using the Subcontracting application, you can set up your system to
outsource all subassemblies and the final assembly or to outsource only a specified
number of subassemblies and the final assembly. The only condition is that the
outsourced assembly must return to the OEM from the MP before it is sent to the
customer or sent to another MP for further processing.
Outsourcing Phantom Assemblies

Subcontracting supports the outsourcing of phantom assemblies. You can define
phantom bills of material (BOM) for design control purposes, and you can use the same
BOM structure for outsourcing. Interlock Manager compresses the phantom BOM to a
single-level bill of material with all the regular components and processes, making them
similar to standard assemblies.

In this diagram, D is a phantom assembly and all others are standard assemblies and
components. Assembly B is outsourced. The same phantom BOM structure is defined
both in the OEM and the MP organizations, and all other setup steps are the same.
When Interlock Manager processes the subcontracting order of outsourced assembly B,

it also compresses phantom assemblies and then processes the assembly as it would any
other assembly.
This diagram illustrates Assembly B after BOM Compression.
All other execution processes are the same.

You can also outsource assemblies with multi-level phantoms. Interlock Manager
compresses the BOM and then processes them as standard BOM.
Outsourcing Lot and Serial-Controlled Items

To use lot and serial-controlled components and assemblies in Outsourced
Manufacturing:

• Items are defined as lot or serial-controlled items in the OEM organization.
• Items and components can be defined as both Lot and Lot and Serial controlled in
internal MP organizations.
• Items and components can be defined as Lot controlled only in the external MP
organization.
• Subcontracting components and Outsourcing assemblies can be defined as Lot

controlled in both MP and OEM organizations.
• The BOM supply type attribute of the lot and serial controlled component of the
outsourced assembly in OEM and MP organizations should be defined as Push.
This is a mandatory setup for external MP organizations only.
• Replenishment sales orders are shipped with component lot numbers, and the Auto
Receive Component program receives these components in the external MP with
same lot numbers.
• Interlock manager processes subcontracting orders if the assembly or component

items are lot controlled only for external MP organizations.
• Lot details are entered in Component Lot Entry before running Process Receiving
Transactions.
• Process Receiving Transactions program processes the lot controlled assembly

receipt and creates the WIP assembly completion and component issue transactions
at the lot level.
• Subcontracting Workbench displays lot information for the adjustments in

Consumption Adjustments.
• Subcontracting workbench displays the component lots for external MP

organizations only in Component Lot Entry.

Lot and Serial Genealogy in Outsourced Manufacturing
Genealogy by Serial:
Genealogy by Lot:
For both Internal and External MP Organizations the genealogy link is built between
the subcontracting component lot in OEM and MP when the PO receipt transaction of
the subcontracting component is processed in the MP organization. This enables users
view to the genealogy of the lot in case of component being the subassembly.
For External MP Organizations:
• When replenishment sales orders are shipped with component lot numbers, the

Auto Receive Component program receives these components in the external MP
with same lot numbers. This establishes a link between Component Lots in OEM
(shipped on sales order) with replenishment PO in the external MP, which builds
the genealogy later on.
• When the WIP completion transaction of the Outsourced Assembly is processed,

genealogy is built between the Outsourced Assembly Receipt transactions and the
WIP job Completion lots.
• When the WIP completion return transaction of the Outsourced Assembly is

processed for the full quantity, the existing genealogy link between the Outsourced
Assembly Receipt transactions and the WIP job Completion is delinked.
For Internal MP Organizations:

• When the Subcontracting PO Receipt transaction of the Outsource Assembly is
processed, genealogy is built between the Outsource Assembly Receipt transactions
and the WIP job Completion lots in MP.
• When the PO receipt transaction of the subcontracting component is processed in

the MP organization, the serial genealogy is built between the subcontracting
component serials in OEM and MP so that the genealogy of the serial can be viewed
in case of component being the subassembly.
• When the Subcontracting PO Receipt transaction of the Outsource Assembly is

processed, genealogy is built between the Outsource Assembly Receipt serials and
the WIP job Completion serials in MP for the lot and serial or serial controlled
assembly.
• When the RMA receipt transaction is processed (RMA for the subcontracting
purchase order) for the full quantity, the existing lot genealogy link between the
Outsource Assembly Receipt transactions and the WIP job Completion lots is
delinked. The existing serial genealogy link between the Outsource Assembly
Receipt transactions and the WIP job Completion serials is also delinked.

10
Troubleshooting

• Overview
Overview
Oracle Subcontracting, works effectively if you closely follow the setup steps described
in Chapter 2 of this guide. If you set up subcontracting incorrectly, then some of the
subcontracting concurrent programs will not process the data and the execution process
will not function properly. You must correct an erroneus data setup and rerun the
processes.
Use the checkpoints provided in this chapter to verify whether concurrent programs are
not processing the data.
Interlock Manager
You can classify Interlock Manager process steps into three sets:
1. Creating WIP jobs in the MP organization. During this process, you can view
subcontracting orders on the workbench. If WIP jobs are not created, then the
subcontracting order is not visible on the Subcontracting Workbench.
2. Create replenishment Sales orders. You can view replenishment orders on the
Subcontracting Workbench.
3. Allocate replenishment orders in accordance with subcontracting order

requirements.
Troubleshooting 10-1
The Interlock Manager concurrent request executes all steps at once if the data is
correctly set up. If the setup is not complete, then Interlock Manager may execute only a
few steps or it may not execute any steps. Review the setup and make the necessary
corrections.
Problem at Step 1: WIP Jobs Are Not Created in the MP Organization
Any of the following issues can cause this problem. Verify and correct the setup.
• The profile MO: Default Operating Unit is not set to the operating unit of the OEM
organization.
• The profile MO: Security is not set.
• Inventory Periods are not opened in the MP organization.
• WIP Parameters are not defined for the MP organization.
• Customer and supplier relationships are not defined in the OEM and MP
organizations.
• Check the validity of BOM and components in the MP organization.
• Check and ensure that routing does not exist in the MP organization.
• Ensure that OEM and MP organizations are not Process-enabled organizations.

EAM and WMS enabled OEM and MP organizations are supported.
• Check that components and assemblies are defined in the OEM and MP
organizations as outsourced assemblies and are pre-positioned or synchronized
components respectively. If this is the problem, then you must cancel the current
PO and create a new PO with the same details.
Problem at Step 2: Interlock Is Not Creating Replenishment Orders

• Shipping networks are not defined for the OEM and MP
• No valid price exists for the components
• Document sequence is not defined for the Order Management transaction type
associated in the shipping networks of OEM to the MP
• Profile sequential numbering is not set as Partially Used or Always used
Problem at Step 3: Replenishment Sales Orders are Not Allocated

In the case of synchronized components if the replenishment sales order is created, it
will always be allocated, so this issue might not arise. In the case of prepositioned
components, which would be a common problem, allocations are made to the existing
replenishment sales orders.

• For Chargeable Subcontracting, the sales price of the replenishment sales order is
different than the component price of the subcontracting order (you can see both
the prices on the workbench).
• Replenishment sales order shipment date is earlier than the requirement date of the
component.

If auto receive is not receiving the components in the MP organization after shipping
the components in the OEM organization, then these problems could occur:
• Replenishment sales order ship date plus shipment lead-time defined in the
shipping networks between OEM to the MP is less than the current date (date at
which the Auto Receive Components concurrent request is run).
• Purchasing periods are not open.

If the Process Receiving Transactions concurrent request does not complete WIP jobs in
the MP organization, then subcontracting order components may not be fully allocated.
Troubleshooting 10-3
A
Workflows
Generating the COGS Account from the Order Type

The COGS Account Generator is a Workflow Process that derives the Cost of Goods
Sold account for a transaction interfaced to Inventory from Order Management /
Shipping. To generate the COGS account from the Cost of Goods Sold account assigned
to the Order Management Transaction Type of the order, you will need to modify the
seeded COGS workflow. To modify this workflow, you will need to change the default
node from Get CCID for a line to Get CCID from the Order Type ID in the Generate
Default Account process. The workflow item type OM: Generate Cost of Goods Sold
Account (which has an internal name of OECOGS) encompasses all processes designed
to build the COGS.
Modifying the Generate Default Account to derive the Cost of Goods Sold account from the
Order Type:
1. Open the OM workflow OECOGS in workflow builder.
Workflows A-1
2. Copy the existing Generate Default Account process and give a new name, e.g.
NEW_DEFAULT_ACCOUNT_GENERATOR, in the property sheet Internal Name
field.
3. Double-click on the new process from within the Navigator. Delete the link
between the Start generating Code Combination and the Get CCID for a line
functions.
4. In place of the deleted link, insert the function Get CCID from the Order Type ID by
dragging it from the Navigator to the process screen.
5. Use the right-click functionality to draw a line connecting the Start generating Code
Combination to the Get CCID from the Order Type ID function.
A-2 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

6. Save this process definition to the database.
7. Define the relationship between the Chart of Accounts structure and the new
Workflow Process for the OM: Generate Cost of Good Sold item type in the
Account Generator Processes form:
OM: Setup > Financials > Flexfields > Key > Accounts
8. Use the flashlight icon to choose the applicable Chart of Accounts.
9. Assign the new Workflow process to the OM: Generate Cost of Good Sold' Item
Type.
Determining the Chart of Accounts:

1. Navigate to the Organization form:
Inventory: Setup > Organization > Organizations.
2. Determine and note the value of the Primary Ledger for the inventory organization
for which you wish to interface the transactions. Query the name of the inventory
organization desired. In the Organization Classification region, select Inventory
Organization line > Others > Accounting Information.
3. Determine and note the Primary Ledger for the Order Management responsibility
for which the order is assigned in the Organization Definitions form. Query the
name of the operating unit desired. In the Organization Classification region select
the Operating Unit line > Others > Operating Unit Information.
4. Query the Primary Ledger in the Accounting Setup page:
Workflows A-3
Inventory > Setup > Financials > Accounting Setup Manager > Accounting Setups
5. Note the value for the Chart of Accounts.
A-4 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

B
Custom APIs for Outsourced Manufacturing
JMF Custom Packages

Outsourced Manufacturing for Discrete Industries provides custom packages that
enable users to:
• Populate header and line level descriptive flexfield attributes when creating
replenishment and subcontracting sales orders.
• Populate work order level descriptive flexfield attributes when creating work
orders or flow schedules for a subcontracting purchase order.
• Create work orders or flow schedules with an accounting class different from the
one defined at the WIP parameters level.
• Control modifications to subcontracting orders by allowing or disallowing PO

approval after any PO changes.
Populate DFF attributes for Sales Orders

Outsourced Manufacturing provides two APIs that can be used to populate the DFF
attributes for Replenishment and Subcontracting Sales Orders.
Default_OE_Hdr_Attr
This API can be used to populate sales order header level descriptive flex field
attributes. The details of this API are as follows:
File Name: JMFCUSHS.pls (Package Specification)
JMFCUSHB.pls (Package Body)
Package Name: JMF_CUSTOM_HOOK
Procedure Name: Default_OE_Hdr_Attr
Custom APIs for Outsourced Manufacturing B-1

The procedure has the following important parameters:
p_x_header_Rec IN OE_Order_PUB.Header_Rec_Type
x_attribute1 OUT NOCOPY VARCHAR2
...
x_attribute20 OUT NOCOPY VARCHAR2
x_return_status OUT NOCOPY VARCHAR2
The parameter p_x_header_Rec is a record that contains information about the sales
order header. Customers can use the information in this record to control what
information gets populated in the DFF attributes.
The parameters x_attribute1 to x_attribute20 are the 20 DFF attributes that can be set by
customers.
To set these values:
1. Open the package body in a text editor.
2. In the procedure Default_OE_Hdr_Attr, find the DFF attribute for which they want
to set their own values.
3. Un-comment the attribute line by removing '--'.
4. Insert their own values by replacing attributeX with their values in single quotes.
5. Save the package body and compile it on their instance database.
The parameter x_return_status is used to convey to the calling function whether any
errors were encountered while inserting header level DFF values. By default, it returns
FND_API.G_RET_STS_SUCCESS (Success) and can be modified to return following
values:
• FND_API.G_RET_STS_SUCCESS - for successful processing.
• FND_API.G_RET_STS_ERROR - for expected errors.
• FND_API.G_RET_STS_UNEXP_ERROR - for unexpected errors.
Default_OE_Line_Attr
This API can be used to populate sales order line level descriptive flex field attributes.
The details of this API are as follows:
File Name: JMFCUSHS.pls (Package Specification),
Procedure Name: Default_OE_Line_Attr
B-2 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

p_x_line_tbl IN OE_Order_PUB.Line_Tbl_Type
x_line_attr_tbl OUT NOCOPY Line_Attr_Tbl_Type
The parameter p_x_line_tbl is a table of records that contains information about the
sales order line. Customers can use the information in this table to control what
information gets populated in the DFF attributes.
The parameter x_line_attr_tbl is a table of records for the 20 DFF attributes that can be
set by customers for each line in the p_x_line_tbl table.
2. In the procedure Default_OE_Line_Attr, find the DFF attribute for which they want
to set their own values.
errors were encountered while inserting line level DFF values. By default, it returns
values:
FND_API.G_RET_STS_SUCCESS - for successful processing.
FND_API.G_RET_STS_ERROR - for expected errors.
FND_API.G_RET_STS_UNEXP_ERROR - for unexpected errors.
Populate DFF attributes for Work Orders or Flow Schedules

Outsourced Manufacturing provides the following API that can be used to populate the
DFF attributes for Work Orders and Flow Schedules.
Populate_Wjsi_Dff_Attr
This API gets called before WIP Mass Load or Flow Schedule creation APIs are called.

Procedure Name: Populate_Wjsi_Dff_Attr
p_subcontract_po_shipment_id IN NUMBER
p_oem_organization_id IN NUMBER
p_mp_organization_id IN NUMBER
p_item_id IN NUMBER
p_start_quantity IN NUMBER
p_wjsi_rec IN OUT NOCOPY
JMF_SHIKYU_WIP_PVT.wjsi_dff_rec_type
The parameter p_subcontract_po_shipment_id is the PO shipment id for the shipment

being processed. Customers can use this value to control what information gets
populated in the DFF attributes.
The parameter p_oem_organization_id is the organization id for the OEM organization.
Customers can use this value to control what information gets populated in the DFF
attributes.
The parameter p_mp_organization_id is the organization id for the MP organization.
attributes.
The parameter p_item_id is the inventory item id for the outsourced assembly.
attributes.
The parameter p_start_quantity is the start quantity for the work order or the flow
schedule. Customers can use this value to control what information gets populated in
the DFF attributes.
The parameter p_wjsi_rec is a record for the 15 DFF attributes that can be set by
customers.
2. In the procedure Populate_Wjsi_Dff_Attr, find the DFF attribute for which they
want to set their own values

values:
Use a WIP Accounting Class that is different from the one defined at WIP parameters
level
Customers can sometime have requirements to create work orders and flow schedules
using an accounting class that is derived by their own logic instead of using the
accounting class defined at WIP parameters level. The following API facilitates this:
Get_WIP_Accounting_Class
This procedure gets called just before inserting records in wip interface table
wip_job_schedule_interface. Users can write their own custom logic to derive the
correct accounting class they want the work orders to be created with. This API, by
default, returns a NULL value for accounting class resulting in WIP Mass Load deriving
the default accounting class value from WIP parameters for the MP organization. Users
can override this by commenting out this return statement and writing their own return
statement instead.
Procedure Name: Get_WIP_Accounting_Class
p_subcontract_po_shipment_id IN NUMBER
p_oem_organization_id IN NUMBER
p_mp_organization_id IN NUMBER
p_item_id IN NUMBER
p_start_quantity IN NUMBER
x_class_code OUT NOCOPY VARCHAR2
The parameter p_subcontract_po_shipment_id is the PO shipment id for the shipment

being processed. Customers can use this value to control what information gets
populated in the DFF attributes.
The parameter p_oem_organization_id is the organization id for the OEM organization.

attributes.
The parameter p_mp_organization_id is the organization id for the MP organization.
attributes.
The parameter p_item_id is the inventory item id for the outsourced assembly.
attributes.
The parameter p_start_quantity is the start quantity for the work order or the flow
schedule. Customers can use this value to control what information gets populated in
the DFF attributes.
The parameter x_class_code is the out variable which will store the user defined
accounting class value. By default, this value is returned as NULL.
Note: Customers will have to ensure that the value they set for
x_class_code variable is a valid value for the
WIP_ACCOUNTING_CLASSES.class_code field. The custom API
doesn't verify whether the value being returned is valid.
values:
Control modifications to subcontracting PO by allowing or disallowing PO approval after

any PO changes
There is a requirement for a change management API which can control any changes
made to the subcontract purchase orders. The API provided for this controls the
changes by allowing or disallowing the approval of the subcontract PO after the
changes are made.
Note: This API controls the changes only if the MP is an internal

organization.
This is not a custom API in the sense that users cannot modify the code.
Customers will have to create a custom node in their PO Approval
workflow. This custom workflow node should call this API.

File Name: JMFGSHKS.pls (Package Specification)
JMFGSHKB.pls (Package Body)
Package Name: JMF_SHIKYU_GRP
Procedure Name: Allow_Subcontract_PO_Approval
The following flowchart design summarizes how this API controls the changes:

C
Windows and Navigator Paths
This appendix covers the following topics:

• Windows and Navigator Paths
Windows and Navigator Paths

This table lists typical navigator paths. Text in brackets ([ ]) indicates a button.
Your system administrator may have customized your navigator.
Window Name Navigation Path
Additional Organization Information Inventory > Setup > Organizations >

Organizations [Others]
Customers Order Management > Customers > Standard
Customer/Supplier Association Inventory > Setup > Organizations >

Organizations [Others] > Customer/Supplier
Association
Find Organization Items Inventory > Items > Organization Items
Netting Payables > Payments > Entry > Netting >

Netting Agreement
Organization Inventory > Setup > Organizations >

Organizations
Organization Item Inventory > Items > Organization Items > Find
Organization Items [Find]
Windows and Navigator Paths C-1

Window Name Navigation Path
Organization Parameters Inventory > Setup > Organizations >

Organizations [Others] > Inventory
Information
Segment Values General Ledger > Setup > Financials > Values
Shipping Networks Inventory > Setup > Organizations > Shipping

Networks
Suppliers Purchasing > Payables > Suppliers > Entry
Transaction Sources Accounts Receivable > Setup > Transactions >

Transaction Sources
Transaction Types Order Management > Setup > Transaction

Types > Define
Transaction Types (Receivables) Accounts Receivable > Setup > Transactions >
Transaction Types
Subcontracting Workbench Subcontracting > Workbench
C-2 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

Glossary
Original Equipment Manufacturer (OEM)

A company that owns the product designs that it sells, and manufactures the products
either in its own factory or by outsourcing to Manufacturing Partners (MP).
Manufacturing Partner (MP)

A company that provides manufacturing services, and manufactures assemblies and
products for OEMs.
Chargeable Subcontracting
In Chargeable Subcontracting, the Original Equipment Manufacturer (OEM) completely
outsources the manufacturing of an assembly to an Manufacturing Partner (MP) and
makes a provisional sale of components by invoicing the MP. The OEM retains the
ownership of the components even after registering the sale of components. Chargeable
subcontracting support is available for Japan, Taiwan, and Korea
Buy/Sell Subcontracting
In Buy/Sell Subcontracting the Original Equipment Manufacturer (OEM) completely
outsources the manufacturing of an assembly to a Manufacturing Partner (MP) by
buying the assembly from the MP and most importantly, sells the components to the
MP that are consumed in the manufacturing of the assembly at the MP's premises.
Buy/Sell subcontracting support is available for all countries.
Full Outsourcing
In Full Outsourcing, the Original Equipment Manufacturer (OEM) completely
outsources the manufacturing of an assembly to an Manufacturing Partner (MP) and
ships the components to the MP but retains the ownership of the components while
they are used in the manufacturing of the assembly. The MP makes no payment to buy
the components. Full Outsourcing support is available for all countries.
Outsourced Assembly
Assembly item that is designed by the OEM, and outsourced to a MP for manufacturing
at the latter's site.
Glossary-1
Subcontracting Components
Components sent by the OEM to the MP for the manufacture of outsourced assemblies.
Subcontracting Sales Order

Sales Order created in Internal MP organizations to ship the finished outsourced
assembly to OEM organization.
Pre-positioned
Components are shipped to the MP without reference to any subcontracting order
ahead of assembly requirements. When the subcontracting order is created, these
components are hard allocated.
Synchronized
Components shipped along with the order, to the MP with references to specific
Subcontracting Order
Purchase order (or Blanket Release) created by the OEM to procure outsourced
assemblies from the MP.
Replenishment PO
Purchase order created for the MP in the Subcontracting process to procure
subcontracting components from the OEM. This purchase order is not visible on the
Subcontracting Workbench. The PO is also closed for invoicing.
Replenishment SO
Sales order created in the Subcontracting process to ship subcontracting components to
the MP.
Allocations
Pegging of replenishment sales orders created in the OEM organizations in accordance
with component requirements for the manufacture of outsourced assemblies at the MP
site.
Glossary-2

Index
outsourcing lot and serial-controlled items, 9-9

A outsourcing phantom assemblies, 9-8
planning drop ship components, 9-5
Accounting Process
process execution drop ship components, 9-6
Buy/Sell Subcontracting, 6-7
Chargeable Subcontracting
costs and prices, 6-3 C
replenishment sales orders shipments, 6- Chargeable Subcontracting
4 Order management transaction types setup, 2-
subcontracting order receipts, 6-6 34
Full Outsourcing Standard Cost of Components and Assemblies
costs and prices, 6-8 Setup, 2-36
replenishment sales order shipments, 6- transaction source setup, 2-33
13 Chargeable Subcontracting Accounts
subcontracting order receipts, 6-14 setup, 2-30
Accounting Process COGS Account Generator, A-1
Chargeable Subcontracting Concurrent Programs
overview, 6-1 Subcontracting Process, 3-15
Accounts, 2-30 Concurrent Requests
Associating Customers and Suppliers Auto Receive Components, 3-22
setup, 2-18 Interlock Manager, 3-15
Auto Receive components Process Receiving Transactions, 3-23
troubleshooting, 10-3 reconciliation manager, 3-19
Auto Receive Components Confirmation Report
concurrent request, 3-22 external mode, 7-4
internal mode, 7-9
B Consumption Adjustments, 5-6
Costs and Prices, 6-3, 6-8
BOM for Outsourced Assemblies
Customers and Suppliers
setup, 2-29
setup, 2-16
Business Flows
drop ship components from RMS to MP, 9-1
modeling components for drop ship, 9-1 D
multi-level outsourcing, 9-8 Defining Cost Groups for MP Organizations
Index-1
Seiban-Based manufacturing, 8-5 Original Equipment Manufacturer (OEM)
Defining Project Definitions Organizations
Seiban-Based manufacturing, 8-7 setup, 2-7
Defining WIP Parameters, 2-10 Outsourced Assembly with Prepositioned and
Drop Ship Components from RMS to MP Flow, synchronized Components
9-1 process execution, 3-11
Outsourced Assembly with Prepositioned and
E Synchronized Components Overview, 3-5
Outsourced Assembly with Prepositioned
Endeca
components
for outsourced manufacturing, 4-1
process execution, 3-9
Endeca Information Discorvery, 4-1
Outsourced Assembly with Pre-positioned
Components Overview, 3-3
F
Outsourced Assembly with Synchronized
Features, 1-14 Components Overview, 3-2
Full Outsourcing Outsourcing Lot and Serial-Controlled Items, 9-9
accounting process, 6-8 Outsourcing Phantom Assemblies, 9-8
Overview
G outsourced assembly with prepositioned and
Glossary, Glossary-1 synchronized components, 3-5
outsourced assembly with pre-positioned
I components, 3-3
outsourced assembly with synchronized
Interlock Manager
components, 3-2
concurrent request, 3-15
planning, 3-1
troubleshooting, 10-1
setting up, 2-2
Item Definitions
subcontracting overview, 1-1
defining subcontracting components (MP), 2-
troubleshooting, 10-1
26
workbench, 5-1
defining subcontracting components (OEM),
2-25
P
setup, 2-20
Planning Drop Ship Components, 9-5
M Price Lists for Subcontracting Components
setup, 2-38
Manufacturing Partner (MP) Organizations
Process Consumption Adjustments, 5-8
setup, 2-10
Process Execution
Modeling Components for Drop Ship, 9-1
outsourced assembly with prepositioned and
Multi-Level Outsourcing, 9-8
synchronized components, 3-11
outsourced assembly with prepositioned
N components, 3-9
Netting Agreements outsourced assembly with synchronized
setup, 2-50 components, 3-7
Process Execution Drop Ship Components, 9-6
O Process Receiving Transactions
Organization Items concurrent request, 3-23
setup, 8-11 processing logic, 3-24
Index-2
troubleshooting, 10-3 project definitions, 8-7
Process Steps purchase price of an outsourced assembly, 2-
overview, 2-2 41
Profile Options receivables transaction type, 2-32
setting up, 2-6 Seiban-Based manufacturing, 8-1
Purchase Price of an Outsourced Assembly Seiban Organization items, 8-11
setup, 2-41 Seiban organizations, 8-2
shipping network
R default, 2-43
subcontracting, 2-43
Receivables Transaction Type
sourcing rules, 2-50
setup, 2-32
standard cost of components and assemblies,
2-36
concurrent request, 3-19
subcontracting components (OEM), 2-25
Replenishment Sales Order Shipments, 6-13
transaction source, 2-33
Replenishment Sales Orders Shipments, 6-4
WIP parameters, 2-10
Reports
Setting Up Profile Options, 2-6
Confirmation Report, 7-4
Setup Steps
Cost Update Analysis Report, 7-10
overview, 2-2
Order Report, 7-1
Shipping Network
overview, 7-1
setup, 2-43
Sourcing Rules
S
setup, 2-50
Seiban-Based Manufacturing, 8-1 Subcontracting: Confirmation Report
defining cost groups for MP organizations, 8-5 reports, 7-4
defining project definitions, 8-7 Subcontracting: Cost Update Analysis Report
organization items, 8-11 reports, 7-10
planning, 8-12 Subcontracting: Order Report
setup, 8-1 reports, 7-1
subcontracting execution, 8-13 Subcontracting Execution
Seiban Organizations Seiban-Based manufacturing, 8-13
setup, 8-2 Subcontracting Order Receipts, 6-6, 6-14
Setting Up Subcontracting Overview
accounting, 2-30 Buy/Sell Subcontracting, 1-1
associating customers and suppliers, 2-18 Chargeable Subcontracting, 1-1
BOM for outsourced assemblies, 2-29 Comparing Subcontracting Business Types, 1-
customers and suppliers, 2-16 1
item definitions, 2-20 Full Outsourcing, 1-1
Manufacturing Partner (MP) organizations, 2- Subcontracting Planning, 3-1
10 overview, 3-1
netting agreement, 2-50 Subcontracting - Planning
Order Management Transaction Types, 2-34 Seiban-Based manufacturing, 8-12
Original Equipment Manufacturer (OEM) Subcontracting Process Execution, 3-6
organizations, 2-7
outsourced assemblies in OEM, 2-20 T
overview, 2-2
Troubleshooting
price lists for subcontracting components, 2-38
Index-3
auto receive components, 10-3
interlock manager, 10-1
overview, 10-1
process receiving transactions, 10-3
W
Windows and Navigator Paths, C-1
WIP Parameters
setup, 2-10
Workbench
consumption adjustments, 5-6
overview, 5-1
replenishment orders, 5-4
subcontracting orders, 5-1
Workflow
Chart of Accounts
determining, A-1
Generate Default Account
modifying, A-1
Index-4

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Oracle® Outsourced Manufacturing for Discrete

Part No. E48953-04

Primary Author: Sujata Patnaik

Send Us Your Comments

4 Endeca Information Discovery

6 Subcontracting Accounting Process

8 Subcontracting For Seiban-Based Manufacturing

9 Subcontracting Business Flows

C Windows and Navigator Paths

Glossary of Subcontracting Terms

Access to Oracle Support

Related Information Sources

Guides Related to All Products

• Oracle Purchasing User's Guide

• Oracle Payables User Guide

Oracle Projects Documentation Set

Oracle General Ledger User's Guide

Oracle Payables User's Guide

Do Not Use Database Tools to Modify Oracle E-Business Suite Data

This chapter covers the following topics:

Overview of Oracle Outsourced Manufacturing

• Nature of Component Supply:

• Shipment of Finished Goods:

• Manufacturing Partner Type

• Internal Manufacturing Partner Organization:

• Full (Non-Chargeable) Outsourcing

Note: Buy/Sell and Full Outsourcing types of subcontracting works

Chargeable (Shikyu) Subcontracting

1-2 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

Chargeable Subcontracting Process

The Chargeable Subcontracting Process diagram describes the chargeable

3. OEM outsources the manufacturing of assembly A by raising a purchase order or a

Note: The purchase price of the assembly is determined

Note: Although the OEM buys components at a certain price, the

5. Appropriate units of components B and C are allocated to the respective purchase

Note: In a chargeable subcontracting relation, the MP does not pay

1-4 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

The Buy/Sell Subcontracting process diagram describes a buy/sell subcontracting

3. The OEM outsources the manufacturing of assembly A by raising a purchase order

1-6 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

Note: Like chargeable subcontracting, the OEM may sell the

5. Appropriate units of components B and C are allocated to the respective purchase

Note: In a buy/sell subcontracting relationship, the shipment of the

7. As the sale of subcontracting components and purchase of outsourced assemblies

Note: Unlike chargeable subcontracting, netting of subcontracting

Full (Non-Chargeable) Outsourcing External Organizations

Full Outsourcing Process (External MP Organization)

1-8 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

Full (Non-Chargeable) Outsourcing Internal Organizations

• Wherein due to capacity constraints, the OEM organization sources from an

To support Full Outsourcing with Internal Organizations, the Full Outsourcing

Note: Subcontracting components at MP organization item master level

To define an organization as an internal MP organization select the check box for MP

1-10 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

The Full Outsourcing Process: Internal Organizations diagram describes full

2. Interlock Manager is run to create Subcontracting Sales Orders, Discrete Jobs,

4. MP receives respective replenishment POs.

Note: Subcontracting: Interlock Manager concurrent program's

• If the Quantity on the Subcontracting Order is updated, the

• If the Subcontracting Order in OEM Organization is cancelled

1-12 Oracle Outsourced Manufacturing for Discrete Industries User's Guide

7. OEM receives assembly item A against the Subcontracting Order.

9. AR invoice is created against the ship confirmed Subcontracting Sales Order